The Invisible Hook: The Hidden Economics of Pirates
Reviewer: Mitchell A. Belfer
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Reflecting on the current state of international relations it is clear that decision-makers need to return to the basics of economic theory to fully appreciate and learn from the receding economic crisis. However, despite a plethora of national and international policy recalibrations, few seem willing to publically reassess the nature of international economics and present some simple explanations for how it all went wrong and what is needed to safe-guard against repetition. Where political personalities have failed to properly inform their publics, some scholars have accepted the responsibility that accompanies academia and produced works that are both accessible and informative. Of these, Peter T. Leeson's work entitled The Invisible Hook: The Hidden Economics of Pirates, stands out as a novel contribution to international economics and, by extension, international relations.
As the title suggests, Leeson's focus is the economics of pirates; in this case the pirates of myth, of film and of history, though the scope of the research conducted is applicable to a wide range of current international economic actors ranging from individuals, private and public corporations, states, non-state organisations as well as inter-state trading blocs. This is due to the economic spinal-cord Leeson adopts to construct meaningful explanations of actors' behaviour, which gravitate around the traditional rational actor concept.
Despite occupying an age increasingly marked by public displays of personal information - and thereby being confronted with seemingly irrational behaviours - there is still much to be said about the underlining logic of actors' rationale and Leeson's work reminds its readers that there are rational driving forces behind nearly all actions, even those which are morally repugnant. At present a debate is unfolding over sources and forces behind identity construction, including acceptable modes of behaviour. While Leeson does not directly enter the academic fray on identity formation, his research and analysis nonetheless contribute to a general understanding of interest recognition (re: economic) and the means likely to be deployed in order to achieve such interests.
In the case of Leeson's pirates, it is the desire for maximising profit while limiting costs which determined their behaviour; behaviour popularly regarded as unlawful and immoral, using violent means to steal others' property for private financial gain. Yet, as Leeson reiterates several times, the image of pirates was, and continues to be, a mirage. Instead, in pirates' quest to financially gain they developed a rather sophisticated system of law, governance, marketing and economics.
Regarding governance, Leeson suggests a certain democratic system of checks and balances that, out of necessity, was cultivated for the sake of individual gain and harmony aboard pirate ships (p. 43). Indeed, pirate captains, quartermasters and other positions of rank were elected by the crew. Captains were not dictators, arbitrarily deciding on ships' missions or meting out violence, rather they deferred to the prevailing consensus in a bid to maintain cooperative relations between all ‘hands on deck.' Consensus building relied heavily on information sharing and public (even transparent) deliberations because, according to Leeson, "pirates needed to prevent their outlaw society from degenerating into bedlam (p. 46)." Dissent from majority decisions may not have been widely tolerated however Leeson demonstrates that democratic principles were the preferred means of governing pirate behaviour because all members relied on the smooth operation of the ship in order to achieve their self-interests of wealth generation.
Such a hypothesis, although applied to the microcosm of a pirate ship, bespeaks the relationship between capitalism and democratic systems of governance and the lessons derived from the pirate experience are applicable to larger political and economic actors. For instance, one of the main reasons for the international economic crisis (2008-present) rests on the information and decision-making gulf between individuals and the captains of industry - democratic inputs were simply neglected - and the deeply embedded idea that political leaders in democracies are not overtly accountable for economic affairs since, after all, the economic system is based on laissez-faire free-market capitalism. Leeson's pirate parable reinforces the - often discarded - view that citizens, whether on a pirate ship or within a larger political community, are each stakeholders, receiving personal benefits when things run smoothly, and facing personal costs when sailing into murky waters.
To ensure that the right course (the most profitable for all on board) was pursued, a pirate code was maintained that held the captain accountable to the crew. This code included marketing and economic strategies - a certain ‘brand name' of piracy - that meant to encourage social cohesion (re: identifying ‘in' and ‘out' groups, sharing spoils, elections), decrease free-riding (re: rewarding contributors, punishing lethargy), and, again, raise financial benefits for all within the pirate community. Interestingly, according to Leeson, pirates did not distinguish between races or colour (unusually progressive for the times), and instead judged all members of the community according to merit; bravery, intelligence and/or leadership skills. Given that most 17th-18th century European societies were racially segregated and discrimination was rife, the idea of racial equality aboard a pirate vessel must have served as a strong incentive for minorities to join. Indeed, Leeson provides an interesting dataset of 23 seventeenth century pirate crews divided according to race (p. 158) which reveals that between 15%-98% of pirate crews consisted of black pirates. In the contemporary world, working towards the eradication of racial inequality should be taken as a moral prerogative and not seen as a marketing ploy; however it seems that Leeson's pirate parable regarding racial discrimination provides clues as to where modern societies may be going astray.
While racism still exists, it is no longer institutionally acceptable (in most European states), yet an ongoing debate is raging over how to deal with the great influxes of immigrants to Europe. If Leeson's observations are accurate, then the optimal goal of ensuring benefits for all can only be achieved by turning immigrants into stakeholders. Doing so would imply that the new arrivals would each individually gain from the success of the community while failing to do so would result in disharmony and competing interests. This aspect of the pirate parable needs to be re-evaluated in a modern European context as it seems that too much attention is being paid to the politics of difference rather than the economics of similarities for, after all, rational people seek to increase their quality of life and, to that end, are intrinsically greedy.
For Leeson greed is neither ‘good' nor ‘bad,' but rather it is a characteristic of people that produces either positive or negative results. Citing Adam Smith, Leeson argues that "... without your employer's greed, you wouldn't have a job. The beauty of markets is that they harness individuals' greed and make it service other people's desires. Remove the lure of riches and you remove your best shot at living a materially enriched life (pp. 177-178)." So, if everyone is greedy - to one degree or another - and can recognise the important role that others play in assisting the process of wealth generation, then it is reasonable to try and increase social harmony which can only be done through extending the stakeholder idea to all members of the community.
Admittedly, this review only scratched some ideas examined in The Invisible Hook. However, it is clear that Leeson's sharp observations on the political and economic lives of pirates should be recontextualised and applied to current international economic relations since economic nationalism, cronyism, corruption and mismanagement are on the rise while political leaders are passing the buck of responsibility with greater frequency. It may be ironic that 17th century piracy should act as an inspiration for managerial techniques of state in the 21st century, however Leeson's remark to "(l)et your business drive your thinking about managerial organisation (p. 180)" is astute, particularly if your business is the business of state on which millions of people are reliant for the essentials of their lives including employment, food, water, and healthcare.