Piracy off Somalia

Perils of the sea

Foreign navies are trying to stop Somali pirates. The may only displace them, or make them nastier

AS SOON as they heard that Captain Richard Phillips had been rescued by the American navy—snipers had killed three pirates holding him on a lifeboat—the 19-strong crew of the Maersk Alabama whooped for joy. The cargo ship’s horn hooted and flares were fired to celebrate the release on Saturday April 11th of the skipper who had given himself up to win the release of his crew.

Two days earlier French commandos had also been in action. They freed four of their nationals, including a three-year-old boy, held hostage aboard a yacht, the Tanit (pictured above). One captive was killed. Then, on Wednesday, a French warship captured a group of 11 pirates, apparently from a “mother ship” out at sea.

The United Nations envoy to Somalia, Ahmedou Ould-Abdallah, said such stern military measures “are sending a strong message to the pirates and, more importantly, to their backers”. But for the moment it has been met with defiance. Some pirates said they would kill French or American sailors who fall into their hands. And there is little sign that attacks have been deterred. Since Captain Phillips’s release at least four more ships have been attacked.

Twenty ships, ranging from bulk carriers to fishing vessels, along with some 300 sailors, are being held by Somali pirates. So far ships have been attacked for gain rather than for ideology and pirates have almost always treated their hostages well. But Vice-Admiral William Gortney, the commander of American naval forces in the region, suggests that things could turn nastier as foreign navies resort to greater force.

The combination of one of the world’s busiest shipping lanes (20,000 ships a year pass through the Gulf of Aden) and the world’s most failed state make the waters off Somalia the most prone to pirate attacks. Ransoms as high as $3m make piracy attractive. Money earned pays for faster boats and better navigation equipment. Some captured craft are used as floating bases from which speedboats can be launched against merchant vessels hundreds of miles offshore.

The International Maritime Bureau, a private-sector outfit, counted 111 pirate attacks off Somalia in 2008 (nearly triple the previous year’s tally), including the capture of 42 vessels—among them the Sirius Star, a Saudi supertanker, and the Faina, a Ukrainian ship carrying tanks. So far this year pirates have been more assiduous but less successful, mounting 68 attacks and nabbing only 18 ships.

The presence of more foreign warships has helped. These include vessels from the European Union, NATO, an American-led coalition and from countries such as China and India protecting national vessels. Often their effect has been to displace the problem from the Gulf of Aden to the Indian Ocean.

President Barack Obama says America is “resolved to halt the rise of piracy”. But controlling the problem would require a great many warships. Some 20 warships now patrol 1.1m square miles of ocean—roughly the area of the EU. “There is a lot of water out there. Twenty assets does not make much of an impact,” says Commodore Tim Lowe, the British deputy commander of the American-led naval coalition. He says one assessment estimated it would take about 140 warships to secure the Gulf of Aden; several times that would be needed to protect the seas off eastern Somalia.

A ship’s radar might detect pirate skiffs at a range of about 15 to 20 miles, assuming they can be identified among local dhows and fishing vessels; with a helicopter, a warship might be able to patrol to a radius of about 100 miles. But all too often, recounts a naval commander, helicopters arrive only to watch pirates taking their prey back to Somalia. Matters are confused by many false alarms from nervous merchant seamen and spoof distress signals sent by pirates to divert navies.

So merchant ships are encouraged to look after themselves. Those in the Gulf of Aden are told to stick to a designated “transit route” and to bunch up for protection in the most dangerous areas. That makes it easier for warships to monitor, though not escort, slow ships and those with decks low off the water. Such measures have made it harder for pirates, but some captains prefer to go it alone to save time.

An option might be to to organise protected convoys but that would require more warships than are available. Some have suggested arming merchant ships but that would risk a spiral of bloodshed. For now, passive self-defence is recommended: barbed wire to protect vulnerable parts of ships, fire hoses to push pirates away and an alert crew to spot attacks early to allow the ship to take evasive action. “It takes pirates about 15 minutes to board a ship. The more time they can gain, the greater the chance that we can help them,” says Commodore Lowe.

One Western naval officer says placing all the warships under a single command, perhaps of the UN, and adopting the same rules of engagement would help to make them more effective. Ultimately, though, the solution is on land: the creation of a Somali authority to control its territory and patrol its shores. That is a long way off.

For now, the greatest friend of merchant shipping is likely to be the weather. The south-west monsoon begins towards the end of May until about August, making the seas too rough for pirates. It cannot come too soon.

The Tax Capital of the World

States are raising taxes despite the 'stimulus'; New York is No. 1.

Like the old competition to have the world's tallest building, New York can't resist having the nation's highest taxes. So after California raised its top income tax rate to 10.55% last month, Albany's politicians leapt into action to reclaim high-tax honors. Maybe C-Span can make this tax competition a new reality TV series; Carla Bruni, the first lady of France, could host.

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They can invite politicians from the at least 10 other states that are also considering major tax hikes, including Oregon, Illinois, Wisconsin, Washington, Arizona and New Jersey. One explicit argument for the $787 billion "stimulus" bill was to help states avoid these tax increases that even Keynesians understand are contractionary. Instead, the state politicians are pocketing the federal cash to maintain spending, and raising taxes anyway. Just another spend-and-tax bait and switch.

In New York, Assembly Speaker (and de facto Governor) Sheldon Silver and other Democrats will impose a two percentage point "millionaire tax" on New Yorkers who earn more than $200,000 a year ($300,000 for couples). This will lift the top state tax rate to 8.97% and the New York City rate to 12.62%. Since capital gains and dividends are taxed as ordinary income, New York will impose the nation's highest taxes on investment income -- at a time when Wall Street is in jeopardy of losing its status as the world's financial capital.

But who and where are all these millionaires to pluck? More than any other state, New York has been hurt by the financial meltdown, and its $132 billion budget is now $17.7 billion in deficit. The days of high-roller Wall Street bonuses that finance 20% of the New York budget are long gone. The richest 1% of New Yorkers already pay almost 40% of the income tax, and the top 0.5% pay 30%.

Mr. Silver thinks he can squeeze more from these folks without any economic harm, arguing that recent income tax hikes didn't hurt New Jersey. (Yes, the pols in New York actually hold up New Jersey, whose economy and budget are also in shambles, as their role model.) The tax hike lobby in Albany points to a paper by Princeton researchers reporting that the number of "half-millionaires," those with incomes above $500,000, increased by 60% from 2003-2006 after New Jersey taxes rose (the top rate is now 8.98%). But this was a boom time for the national economy, especially in the financial industry where many New Jerseyites work, or at least used to work.

The better comparison is how New Jersey compared to the rest of the nation. According to the study's own data, over the same period the U.S. saw an increase of 76% in half-millionaire households. E.J. McMahon, a budget expert at the Manhattan Institute, calculates that New Jersey lost more than 4,000 high-income taxpayers after the tax increase.

Mr. Silver says of the coming tax hikes: "We've done it before. There hasn't been a catastrophe." Oh, really? According to Census Bureau data, over the past decade 1.97 million New Yorkers left the state for greener pastures -- the biggest exodus of any state. New York City has lost more than 75,000 jobs since last August, and many industrial areas upstate are as rundown as Detroit. The American Legislative Exchange Council recently said New York had the worst economic outlook of all 50 states, including Michigan. And that analysis was done before these $4 billion in new taxes. How does Mr. Silver define "catastrophe"?

Oh, and it isn't just high earners who get smacked. The new budget raises another $2 billion or so on top of the $4 billion in income taxes with some 100 new taxes, fees, fines, surcharges and penalties to be paid by all New York residents. There are new charges for cell phone usage, fishing permits, health insurance (the "sick tax"), electric bills, and on bottled water, cigars, beer and wine. A New York Post analysis found that a typical family of four with an income below $100,000 would pay more than $800 a year in higher taxes and fees.

This is advertised as a plan of "shared sacrifice," but the group that is most responsible for New York's budget woes, the all-powerful public employee unions, somehow walk out of this with a 3% pay increase. The state is receiving an estimated $10 billion in federal stimulus money, and Democrats are spending every cent while raising the state budget by 9%. Then they insist with a straight face that taxes are the only way to close the budget deficit.

And so Albany is about to make a gigantic gamble on New York's economic future. The gamble is that the state with the highest cost of doing business can raise taxes on everyone who lives, works, breathes, eats or drinks in the state and not pay a heavy price for it. If they're wrong, New York will enhance its reputation as the Empire in Decline State.