Going on the Account: Of Buccaneers and Balance Sheets…

My thanks to Annalee Newitz discussing the Somali pirate stock market at io9.com  Pointing out the way the booty from those ventures have encouraged investment, turning such ventures into financed forays at sea, shows how entrenched the pirates of Somalia have become in their lands.

Which raises an interesting question:  How new is what the Somalis have done as far as the elements of piracy are concerned?

Short answer: Not very.

Remember that during the Golden Age of Piracy, when crews banded together, they would draw up articles that they would sail under and make agreements for how to divide the booty from each venture.  Said pieces were often called “shares,” a term also applied to portions of profits in publicly traded companies; I’d love to draw a direct connection between these terms, but that’s a plank I don’t feel like walking tonight…

Which brings up an observation: Had the models been in place earlier, more such investment opportunities like this would have sent more pirates to sea.  During the high days of Blackbeard and Bartholomew Roberts, mercantilism was the ruling economic theory, whereby the main economic driver was hard currency, gold and silver, the basis for which goods could be exchanged.  It’s not until 1776, well after the Golden Age of Piracy has come to a close, that Adam Smith’s The Wealth of Nations first gets published, wherein belief in the hard trade in goods is challenged by the value of labor as contributing to wealth.  Simply put, after Smith, wealth was considered less by what you possessed than by what you could do.

And here, in a post-mercantilist system, does the prospect arise for pirate shares that could be invested in by the sutters and other land lubbers willing to risk some for a piece of the action.  The pirate crew articles that come from that period demonstrate some basic understanding of Smith’s ideas, but without the economic models to guide them most folks are limited to being shareholders only if they take a direct hand in the venture, not realizing that making a capital investment alone is enough to promise you a return should the voyage succeed.  And the issuance of letters of marque showed a desire to invest in such ventures in return for potential profits was there, though the option was limited to those benefitting most in a mercantilist economy (representatives of royalty mostly).

The closest you come to application of these ideals during the time is in the underwriting business being pioneered by Lloyds of London.  Without reliable communications in place, however, the idea of wealth disbursement in anticipation of profit couldn’t effectively leave the coffee house on Tower Street; had everything not been so centralized in London during the time, insurance would not have been practical.  

Keep in mind post-Wealth of Nations the career of Jean Lafitte.  With the benefit of more modern economic theory to draw upon, he engaged in raising revenues much the way the Somalis are reported to be doing; he becomes a bit more famous, however, when he decided to move off the trading floor and into the field with the Acquisitions arm…

The article Annalee cites in her piece at ForeignPolicy.com is also of interest, as it discusses (obliquely) the organized criminal element that has probably infused the Sweet Trade.  And if we started here going deeper into the history of the links between pirates and organized criminal elements, I’d never write another chapter of the novel…


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