Piracy and Lunacy

 

The shipping industry hasn’t changed much in the last 5,000 years. Apart from natural perils at sea, ships have battled pirates across the millennia; piracy has been an ongoing issue even though it is only beginning to garner contemporary media attention. As an owner of one of the leading international shipping companies in Westcliffe, friends have asked me to opine on the subject.

 

During the swashbuckling era of the 16^th and 17^th centuries, great bounties were stolen by English, Portuguese, Spanish and Dutch privateers. Fortunes have been made and lost from captured or missing cargo, and today in shipping, fortunes are being made and lost but as a consequence of modern economic realities.

 

Piracy and the illegal boarding of ships occur regularly with vessels and their crews occasionally disappearing entirely. The Horn of Africa and the Gulf of Aden have recently captured people’s attention with the attempted hijacking of the U.S. flagged Maersk Alabama and the subsequent rescue operation by the Navy Seals. Kudos to Captain Phillips and hopefully our Navy sharpshooters will not be prosecuted by the ACLU for failing to exercise Due Process.

 

The basic laws of the sea have existed for generations, but more recently an overarching structure has been ratified, if not enforced, by the United Nations through their International Maritime Organization (IMO).

 

It has been determined by international maritime lawyers that before prosecuting a pirate proper evidence of alleged crimes must be amassed. Additionally, captured pirates’ human rights must be protected, which means they can’t be confined in a convenient location, but only in countries where these rights might be secure. There is also a quandary whether International Law, Maritime/Admiralty Law or the law of the assaulted vessel’s national flag should apply to the perpetrators of the crime.

 

In this time of worldwide financial crisis, the Somali pirates have created a low-tech but profitable business. Once a ship is captured, it is taken back to Somalia. A pirate spokesman contacts the owner and the spokesman demands the amount of ransom necessary to guarantee the safe return of the vessel and its crew. The owner then appoints a professional negotiator with pirate experience to cut a deal and eventually a final sum payable in cash gets delivered.

 

The normal elapsed time from capture to release is about two months and the average ransom is about $2 million. It is estimated during the last few years the pirates have netted more than $100 million, monies which have enabled them to purchase more sophisticated equipment and arms.

 

To the $100 million of ransoms, one can add the cost of various navy assets plying the seas trying to protect shipping lanes, the deviation of vessels from that area and the loss of revenue at the Suez Canal caused by owners refusing to sail that general region.

 

There are currently about 15 ships from various international registries and about 300 mariners in detention in Somalia.

 

Looking beyond our tiny corner of the world in the Wet Mountain Valley where animals and hay are transported by truck, we all have an interest in safe oceans as more than 90 percent of international trade is seaborne. In terms of volume, more than 20,000 ships annually sail through the Gulf of Aden or near the Horn of Africa.

 

If a ship owner arms a crew that could void the ship’s hull insurance. Armed mercenaries are another option, but that has also been rejected by most insurance companies.

 

The International Chamber of Shipping has just recommended a 600 mile safety zone off the Somalia coast. This will help, but as we have seen with other illegal or terrorist activities, if it is not stopped and punished, it will escalate or create a template for similar activities in other parts of the world.

 

Last weekend the Somalia Parliament approved a measure introducing Islamic Sharia Law as their binding legal system. One has to question the providence of pirates returned to Somalia for criminal prosecution and more importantly, one has to query about the ultimate use of ransom money.

 

 

 

NEW FRAME, OLD GAME

 

 

The book Words That Work by Frank Luntz discusses the study of framing words for political and business purposes. For example, one focus group was given the concept of welfare and the vast majority of participants voted against it. Another focus group with about the same demographics was asked about government’s responsibility to help the less fortunate. By about the same overwhelming margin, the second group voted in support of government’s obligation to aid the poor.

 

Framing has become a science and people’s reactions to an idea can depend on how it’s phrased.

 

Recently, my stock broker called and told me we should harvest my tax losses. The word harvest struck an agrarian note with me and created an image of abundance and wealth as opposed to one of privation and pain.

 

Last week I met a guy who is a Stabilization Agent. My first reaction was that he was an ingredient in yoghurt or ice cream, but he went on to explain his field of expertise. He goes in to companies teetering on bankruptcy, convinces lenders that the company is salvageable, and proceeds to negotiate debt and labor contracts as if the company has already declared chapter 11.  

 

 

On the national level, Fannie Mae and Freddie Mac have entered in to phase of “conservatorship.” I gather it means the brilliant legislators who allowed these institutions to over leverage and trade derivatives will now orchestrate their revival with the same care and expertise that brought them down. At least these two stellar institutions did not grant preferential mortgages.

 

Framing has been around for a long time and if we’re not careful, we can all fall prey to this kind of word play. One of my personal favorites is “deficit spending.” Translation? Spending money we don’t have or continually borrowing money to pay the debt we’ve created.

 

It’s only a matter of time until “toxic assets” will be reframed. Who wants to own anything deemed toxic? Soon they will be referred to as “opportunity assets.”

 

The acronym for the Troubled Asset Relief Program is TARP. One could interpret the word TARP as a protective covering or as a cover-up. The program should have been called the Selective Compensation Rewards for Executive Wastefulness or SCREW. Another option I might suggest: Continual Remorse Americans Provide–CRAP.

 

Be on the lookout next week for a few new phrases emanating from Washington.