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Put Pirates And Kidnappers Out Of Business

Pirates used to hunt ships for the treasure they carried. These days, the crew usually is the most valuable cargo.

A gang of Somali pirates recently received a reported $3.3 million ransom in exchange for the 36-member crew of a Spanish trawler they had captured.

The International Maritime Bureau reports that more incidents of piracy occurred in the first nine months of 2009 than in all of 2008. A total of 661 crewmembers were taken hostage as a result of 306 incidents in the first part of this year. Of those captured, 533 were taken by Somali pirates.

Somalia’s political anarchy and ruined economy planted the seeds of piracy, but this weed was nourished by global cowardice and international cash. Pirates often tap directly into national treasuries, as governments hand over huge sums to rescue their citizens. While the Spanish government has not officially admitted any role in paying the $3.3 million, Prime Minister Jose Luis Rodriguez Zapatero evasively told reporters at a news conference, “The government did what it had to do.”

Spain may have recovered its vessel’s crew, but it only made the growing problem worse. This is basic behavioral psychology: When an act brings positive reinforcement, the act is repeated. A $3.3 million payday in dirt-poor Somalia is very positive reinforcement.

At best, ransom payments promote the rise of organized criminal gangs. Like any enterprise, these gangs will seek to grow their business and maximize their profits. This means reinvesting revenues in more personnel (piracy may be the one of the better job markets in this global recession), bigger mother ships, bigger targets and, last but not least, bigger weapons to back up their ambitions.

At worst, ransom payments are used to finance vicious insurgencies and terrorism. In Colombia, to cite one well-known example, the leftist Revolutionary Armed Forces of Columbia (FARC) has made the capture of hostages a source of funding as well as an avenue to demand political concessions and prisoner exchanges. Anti-government forces in Iraq turned to abductions to raise money to fight against Iraqi government and allied forces. In Mexico, corrupt and underpaid police are behind much of a recent wave of kidnappings that target the country’s more prosperous citizens.

Every ransom payment virtually guarantees another abduction. Only negative reinforcement — a substantial risk to kidnappers that they will be captured or killed, coupled with a greatly reduced likelihood of turning their hostages into ready cash — can put an end to this scourge.

Kidnappers look at other human beings as wild game to be harvested. The rest of us have a simple choice: Either we are, indeed, fair game for predators, or we are instead soldiers in a battle for our own freedom. Kidnapping is a crime that must not be allowed to pay.

Of course, this is easy to say when you are not the one waiting for a loved one to return home. Kidnappers have a livelihood to protect, and they are perfectly capable of killing hostages if ransom demands are refused. Murdering a hostage can be good business, from the kidnapper’s point of view, if the murder gives the killer more leverage in future negotiations.

Rescue missions occasionally eliminate the need for ransom payments, but they pose immense risks to both rescuers and captives. Navy SEALs rescued the captain of the U.S.-flagged Maersk Alabama when it was taken last April, killing three pirates and capturing a fourth. When the same vessel was attacked again this month, armed guards aboard the ship repelled the pirates.

President Obama’s authorization of deadly force against Somali pirates was criticized sharply by the international shipping and insurance industries, which argued that the directive would only result in attacks becoming more violent. For now, vessels carrying firearms may be safer, since a few warning shots can prompt pirates to wait for an easier target. The second assault on the Maersk Alabama demonstrated this. But if most vessels are armed, pirates will simply have an incentive to get more and bigger guns, and to attack in larger groups over wider areas.

The goal is to stop kidnappings before they start, by capturing or killing the kidnappers — it is still a pretty small industry, after all — and by eliminating the financial incentives. A few basic steps, all of which would require international cooperation and enforcement, could go a long way toward stopping the problem at its source:

  • Require ships to travel in convoys with armed military escorts through zones where pirates are active. Each vessel should be charged for its share of the cost of the escorts. If paying pirates is part of the cost of doing business, so is paying to repel pirates.
  • Quarantine the Somali coastline and other areas where pirates operate. Limit local craft to a zone no more than 12 miles offshore. This will hurt fishermen and other legitimate craft in the short term, but everybody’s security is ultimately enhanced when pirates are defeated.
  • Enforce trade, financial and military sanctions against governments that pay ransoms to parties outside their own national territory. This is a very tall diplomatic order, but it is essential to keep nations that are victimized from turning the rest of us into victims as well.
  • Prevent private citizens and businesses from succumbing to ransom demands. Corporate behavior can be regulated with civil and criminal penalties. Individuals will need to be monitored and, perhaps, have their financial accounts frozen or restricted. This should be treated as a national security matter.
  • Outlaw kidnap and ransom insurance. Yes, appallingly, there is such a thing. I suspect that some courts already would void such contracts as against public policy, if the question were litigated. Insurers portray these policies as reimbursements for losses, similar to ordinary theft insurance. But in reality they are just another funding source for criminal and terrorist gangs — and they turn kidnapping into a profitable line of business for the insurers, too.

If we fight back against the bandits, innocent people will inevitably die. Victims and families must not be left on their own to resist this extortion; nobody can reasonably be expected to stand by and watch a loved one be killed. Every civilized government must be responsible for stopping itself and its citizens from buckling.

Larry M. Elkin is the founder and president of Palisades Hudson, and is based out of Palisades Hudson’s Fort Lauderdale, Florida headquarters. He wrote several of the chapters in the firm’s most recent book, The High Achiever’s Guide To Wealth. His contributions include Chapter 1, “Anyone Can Achieve Wealth,” and Chapter 19, “Assisting Aging Parents.” Larry was also among the authors of the firm’s previous book, Looking Ahead: Life, Family, Wealth and Business After 55.

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