...

In 1993, the Iraqi Intelligence Service (IIS) directed and pursued an attempt to assassinate, through the use of a powerful car bomb, former U.S. President George Bush and the Emir of Kuwait. Kuwaiti authorities thwarted the terrorist plot and arrested 16 suspects, led by two Iraqi nationals.

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The United States cannot pretend that far-off violence has
no meaning at home, President Clinton declared March 12.
While the aggression of a Saddam Hussein or the violence of a Bosnia may not
directly threaten U.S. shores, the president said, Americans dare not
"overlook the significance" such new challenges present. "Blinders never
provide security," he said.

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The Market Has Spoken
Despite the surge in Somali piracy and encouragement from some employees of the U.S. government, commercial ships aren’t choosing to put armed guards on their vessels. And with good reason: given present conditions, anyway, it’s a bad idea.

As I discuss in The Invisible Hook, like their Caribbean forefathers, Somali pirates are in the business of making money, not harming hostages. Of the 815 hostages Somali pirates took last year, only four died and two were injured under pirate care.

Pirates aren’t treating hostages well because they’re nice guys. They’re treating hostages well because it pays to do so. A dead hostage fetches no ransom and pirates’ business model would collapse if they injured prisoners or allowed them to die. The economics of piracy has a simple bottom line: for all the problems piracy may pose, the threat of dead and injured innocents isn’t one of them.

That could change, however, if commercial ships starting carrying armed guards on their ships. Armed guards will of course defend against pirate attacks, potentially leading to fire fights that could jeopardize innocent sailors’ lives. The prospect of having to battle for their prizes will deter some pirates. But others will remain undeterred. And for the remaining industry, armed guards’ effect may very well be to increase the dangers that piracy poses rather than reducing them.

The profit-driven behavior of commercial shippers corroborates this possibility. Like pirates, commercial shippers also have strong incentives to keep merchant sailors alive and well: insurance costs. If armed guards reduced the dangers of piracy instead of increasing them, commercial shippers’ insurance costs would fall by employing guards instead of rising. But in this case commercial shippers would have hired armed guards already, which they haven’t. Commercial shippers don’t need government to encourage them to undertake the most profitable course of action.

The market has spoken: Even in today’s pirate-infested waters off Somalia, the low probability of being captured by pirates, together with the fact that pirates release their hostages unscathed, means it’s cheaper--and safer--to go without armed guards.