The Pirate Paradox

The President has made a commitment to keeping American shipping crews safe from pirates wherever they travel in the world.  This seems a reasonable response to the recent hostage situation off the shores of Somalia.  The commitment is also a contradiction to Obama’s commitment to supporting American job growth through environmentally responsible policies.
A major problem with using U.S. forces to protect American shipping crews as they travel in dangerous waters is the cost of the goods being protected is dramatically increased but not reported.  The cost of U.S. Navy patrols gets lost in the massive Defense Department budget and simply becomes a part of the cost of running the U.S. government.  The cost of the goods being shipped then becomes a combination of the materials, transport and marketing plus and unknown (and un reported) cost of protection.  When we, the consumer, buy these goods we pay for only part of the cost of the goods.  The other cost for these goods is paid by general tax revenues and deficit spending. 
An alternative to providing U.S. navy protection to private shipping interests is to let the shippers decide how they want to protect their crews and the goods they transport.  They can employ private security or pay the ransoms associated with operating in an area controlled my pirates.  In either case the costs are passed along to the buying public through higher product prices.  These higher prices reflect the true cost of the products. 
When faced with the true costs of products on store shelves consumers might find themselves making different decisions.  They may find themselves seeking out products produced in safer parts of the world.  Local producers may find they are able to compete with products shipped from the other side of the world once the true costs of the products are reflected in their price.
U.S. naval protection of private shippers provides a subsidy to the  shipping companies and to the companies bringing materials from across the world.  At a time when we need more jobs in America and have huge budget deficits we would be better served by letting shipping companies take responsibility for their own security costs.  The free market would reward companies that didn’t have the cost of dealing with pirates built into their cost structure.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s