Home > World Events > Pirates ! (Militarism Whack-a-Mole #173)

Pirates ! (Militarism Whack-a-Mole #173)

May 2nd, 2016

Making the case against militarism is very reminiscent of climate denial whack-a-mole. Demolish one spurious argument, and you’re immediately presented with another. For example, my post showing that the economic benefits of “keeping sea lanes open” could not justify more than a trivial proportion of current naval expenditure, got hardly any substantive responses (apart from tiger-repelling rocks), but a great many saying “what about the pirates?”.

I’ve done the numbers on this one, and they look pretty clear-cut. There are a bunch of estimates on the web of the annual cost of piracy ranging from $1 billion to $16 billion a year.

This seems implausibly high. The amount actually stolen by pirates or paid as ransoms is far smaller, less than a billion a year at its peak, AFAICT. Looking in detail, there’s a fair bit of double counting here (both actual losses and the insurance premiums which offset them are counted, for example), and the high-end numbers typically include some estimate of the cost of naval deployments on anti-piracy patrols. In particular. Still, in the spirit of fair play, I’ll go with $15 billion a year as an upper bound.

Turning to the US Navy* budget, it’s currently just shy of $400 billion a year. That supports a fleet of 272 “deployable battle force” ships, implying an annual cost of $1.5 billion per ship. So, the annual cost of piracy is the same as the cost of about 10 ships. To put it another way, reducing the fleet by one ship, and scaling down anti-piracy operations accordingly would have to increase global piracy by 10 per cent to yield a loss to the global shipping industry greater than the savings to the US (I leave aside the question of why the global shipping industry is such an important recipient of US foreign aid).

Having played military whack-a-mole many times before I can anticipate the responses in my sleep. So, I’ll open the comments threads, resist the temptation to take part, and whack the inevitable moles in a later post.

* The US spends more than other developed countries, but I don’t think the others get any more ship for their shilling, capability-adjusted.

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  1. James Wimberley
    May 2nd, 2016 at 21:45 | #1

    The inefficiency of the naval protection force against Somali pirates – rentagoon thugs in standard – issue speedboats armed with Kslalashnikovs – is striking, given the grotesque disparity in capabilities.

    Let me toss one more hypothesis into the mix. Modern armies, except for the big three (USA, China, Russia) are used to operating in joint forces. The US Army accepts foreign commanders in NATO. The UN has, depending on the year, around 100,000 soldiers in peacekeeping operations at any time, in mixed command structures. It has a lot of problems, stemming from shoestring funding, no proper permanent general staff, and recruitment from the lowest bidder: not SFIK from a general rejection by army officers of the principle of cooperation.

    I get the impression that navies are very different here. You can find examples of joint forces, not always encouraging. The Franco-Spanish fleet at Trafalgar: Gravina was a better admiral than Villeneuve, but as junior partner in the alliance, he had to accept the subordinate role. But it’s comparatively rare.

    Whatever navies are for, it is likely that they could get the job done more cheaply by accepting cooperation and joint operations as the norm. Not to mention joint procurement. The Eurofighter is I’ve heard a pretty good plane.

  2. Newtownian
    May 3rd, 2016 at 07:43 | #2

    John your back of the envelope calculation may or may not be correct. But can you really tell anything from the costing article linked to this story on the World Maratime News site?

    Like so many economic cost stories it doesnt provide further links to the full reports that need to be looked at in detail to check the veracity. Beyond this is the problem that so many economic studies are put up by vested interests. I dont know about this item but would anyone trust cost/benefit of negative gearing provided in a report by the real estate institute by way of analogy?

    Or something closer to home, that recent report which suggested Australia was greatly reducing its emissions. AUSTRALIAN GOVERMENT 2014. Reducing Australia’s Greenhouse Gas Emissions— Targets and Progress Review final Report February.

    Only a close look at the Appendix showed Australia has not lived up to the spirit of Kyoto with most economic production emissions having risen by about 40%.

    Beyond this there is though there is one possible basis for these piracy cost estimates….increased shipping insurance premiums. Though in this case the question might whether the problem is Phantom’s Bengali friends or insurance/finance industry profit gouging which is passed on to the hapless consumer.

  3. Ikonoclast
    May 3rd, 2016 at 07:47 | #3

    This topic is classic misdirection. There are more substantive issues to discuss. For example, why is the world economy stagnating? I will wait for that topic thank you.

  4. John Quiggin
    May 3rd, 2016 at 09:22 | #4

    @Ikonoclast

    If there is one kind of blog comment that really annoys me, this is it. If you think discussion of the topic is a waste of time, don’t waste more time by commenting.

  5. tony lynch
    May 3rd, 2016 at 15:36 | #5

    That is true. But is what’s going on over at Crooked Timber on this topic of much use to anyone?

  6. ChrisH
    May 3rd, 2016 at 16:13 | #6

    You can count the cost of insurance against piracy losses as the cost of piracy: then you are counting the estimated load plus the cost of sharing it. This is often suggested to be smoother over time and more ‘real’ (if insurance is usual, then this is the likely burden to someone in the shipping game). Or you can count the losses to piracy, including ransoms: then you are counting the actual piracy outcomes.
    But you can’t count both: each excludes the other. Hence JQ’s observation.
    Accordingly I agree with JQ that $US15 billion is absolutely a top dollar estimate. The rest of his analysis follows.
    What would happen from a reasonable anti-piracy strategy, rather than using anti-piracy as cover for military games and training, I don’t know.

  7. rog
    May 3rd, 2016 at 19:11 | #7

    Piracy that is beyond the military yet still costs a shipload is internet piracy via torrents. Not that this is all bad; it has forced some musicians to leave their estates and go on the road and it has knocked around some of these protectionist types.

  8. paul walter
    May 3rd, 2016 at 19:36 | #8

    “Avast, ye Swabs!!”.

    There is no doubt that we are being Jolly Rogered by the Military Industrial Financial Complex and its media flaks, who are legion. The indiscriminate actions of rag tags off the coast of East Africa or South China seas is another pretext for yet more military spending, to ensure that local fish etc resources, needed for subsistence in poorer countries are taken by mega trawler fleets who lay waste to fisheries on wasted by-catch alone.

  9. sunshine
    May 3rd, 2016 at 20:55 | #9

    I wonder if ‘the public sees the necessity of massive military spending’ is one of those convenient myths like the ‘the public never wants to pay tax’ one. Those two myths dont sit easily together. Sometimes as a misty eyed Leftist ,in the interest of harmony with friends and family,I choose to believe that my faith in human nature should be balanced by the lack thereof shown by those with the vigilant Conservative urge to guard and protect .Hopefully these hawks arent just paranoid and selfish with no intention to balance anything. I cant help wondering about the more productive good that could be done with the $billions.

  10. Moz of Yarramulla
    May 4th, 2016 at 08:33 | #10

    You seem to be implying that we’d get better anti-piracy per buck if we just donated the money to the UN and sent some of our military off with it. Which I’m inlined to agree with, pending an explanation of why it could never possibly work because Australia not like Fiji or Nepal.

    Back when Aotearoa was being “persuaded” to buy ANZAC Frigates there was serious discussion that it would be cheaper to simply pay Australia the protection money directly and focus NZ navy efforts on things that were actually useful. The submarine debacle-in-waiting seems like a similar situation. Why not have an Australian navy capable of policing rather than providing targets, and make it the best inshore/close offshore navy we can get for a couple of billion a year? I’m sure we have military analysts capable of coming up with an affordable option for what we actually do with our navy, rather than fulfilling the fantasies of old men who dream about WWII.

    Give the savings to the UN and say “international disputes are your problem (except the Timor Gap, that’s ours)”.

  11. May 4th, 2016 at 10:39 | #11

    Well, if it’s bang for the buck we want, there’s the Henry Morgan option: hire the biggest Somali pirate, knight him, and have him clean up all the others. Worked in 1675.

  12. Jim
    May 4th, 2016 at 10:59 | #12

    Moz

    I think you are actually getting close to a sensible strategy here. I’m guessing, but I think about 90% of the benefits of having a navy come from about 10% of the spend (i.e. the small stuff like border protection and disaster relief work (which possibly even provides a benefit in the long-term because sovereign nations don’t invade their friends).

    So what is the point of the big expensive stuff like subs? I cannot think of one realistic risk that would be mitigated (even partially) by a fleet of subs? They appear to be a pretty dumb way to spend $ on the military.

    But then they will protect manufacturing jobs in SA. The estimates I’ve seen in the Australian are that the price premium for local assembly is about $7billion to save 3,000 jobs (presumably for the 10 year construction period). So the implicit annual job subsidy is about $233,000 per worker for 10 years.

    Even in my wildest dreams I couldn’t think of a bigger waste of taxpayers’ money than the subs….

    @Moz of Yarramulla

  13. Nevil Kingston-Brown
    May 4th, 2016 at 11:23 | #13

    Maybe we should subsidise pirates. It would slow down global warming.

  14. Moz of Yarramulla
    May 4th, 2016 at 12:25 | #14

    Jim
    Even in my wildest dreams I couldn’t think of a bigger waste of taxpayers’ money than the subs….

    I can, subsidising coal mines. That is actively endangering Australia, so it’s the antithesis of what the military spending aims for.

  15. James Wimberley
    May 4th, 2016 at 21:49 | #15

    @Nevil Kingston-Brown
    Please forward your Cunning Plan to Bill Gates, who has volunteered to spend billions on transformative, disruptive technological breakthroughs to solve the climate crisis. Let Gates give the Somalis some decent anti-ship missiles and an island near the Straits of Hormuz, and watch the tanker rates soar. If we can’t have a real carbon tax, proxy ones are second best.

  16. Collin Street
    May 4th, 2016 at 22:00 | #16

    I think you are actually getting close to a sensible strategy here. I’m guessing, but I think about 90% of the benefits of having a navy come from about 10% of the spend (i.e. the small stuff like border protection and disaster relief work (which possibly even provides a benefit in the long-term because sovereign nations don’t invade their friends).

    Ehn, some of this is an accounting artefact; “defence” is treated as the main role, and only the marginal cost of “the small stuff” is recorded as its cost.

    You reshape your military around refugee-scaring or disaster-relief and you might spend less: you’ll buy different — cheaper, civilian-spec — ships, say, but you’re still paying the same payroll, you’ll still be spending a fair chunk of money and suddenly “defence” becomes dramatically cheaper.

    Less money, but not 90% less, I’d think.

  17. James
    May 5th, 2016 at 19:47 | #17

    I agree with the conclusion (we spend too much on defence), but I think you are committing a fallacy using marginal costs to value infra-maginal changes. If prevention costs fell to zero, piracy costs would increase. At the moment, the observed costs are a result of an equilibrium between piracy opportunities and prevention efforts.

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