Esoteric Piracy

Most people don’t realize how relatively brief the reign of Caribbean piracy was.  When I was growing up, enflamed by the swashbuckling glories of Errol Flynn movies like Captain Blood and The Crimson Pirate and the lurid tales of Bluebeard and Captain Hook and Henry Morgan, I imagined piracy to have been around forever.  Perhaps I was right, but the peak of the Caribbean form lasted only about 25 years.  Many of them justified their piracy as part of England’s never-ending hostilities with Spain, including in their attacks Spanish treasure cities like Porto Bello, Cartagena and Maracaibo, and were licensed to do so by letters of marque designating them as privateers.  While active, the piracy did form a serious threat to the treasuries of Spain by converting the valuable cargoes from the New World into contraband, but it also wrecked havoc on the cargoes of other nations.  Then the British found the solution by hiring Henry Morgan as Governor General of Bermuda with the mandate to catch and hang all the other pirates.  It worked.

But piracy endures, often in much more esoteric forms.  This week, for example, the news is full of the Libor scandals of Barclay’s Bank, which is now spreading to banks like Citigroup, JPMorgan Chase & Co, Deutsche Bank, HSBC Holdings Plc, UBS and the Royal Bank of Scotland, and of the settlement of the suit against Wells Fargo Bank for predatory lending.   Libor is the London inter-bank offered rate, used for determining many other key interest rates, including those for mortgages, student loans and variable rate loans to individuals, institutions and governments. The banks are accused of manipulating the rate by hiding key data, thereby raising the costs for their customers and the profits for themselves. The costs, for example, of bonds to the city governments issuing them are said to be raised in some cases by millions of dollars, causing the cash-strapped governments to have to cut back on police, fire, school and other municipal services in order to cover their lending shortfalls.  Barclay’s itself settled for $450 million, but the criminal investigation of employees continues. Wells Fargo settled for $175 million the charges brought by Baltimore that Wells Fargo targeted minority customers for mortgages at exorbitant rates that they knew the customers could not pay, leading to foreclosure.  The foreclosures spiked the cost to Baltimore of city services generally, especially police and fire services, of course in the process devastating the lives of many.  Both banks deny wrongdoing.  Before them it was the Deutsche Bank and Goldman Sachs raid on Greece, the JPMorgan derivatives scandal, etc., etc. 

What these present pirates share with pirates of the past is their proclivity for pillaging the rich cargoes of the world while flying the flag of legal activity, while concurrently starving governments of their revenues, devastating cities and earnestly proclaiming their own virtue. They just have more sophisticated deniability.  Where they differ is that the wealth of prior pirates often at least partly benefited the poor. 

We truly have entered a new golden age of piracy.  Interestingly, the New York Times points their finger at a cause for this that I have mentioned before, the growing disparity between rich and poor.  In the America of 50 years ago, the ratio of CEO compensation to average worker pay was 40, and the Harvard Business Review tut-tut-ted about it.  Today it is over 140, and many aspiring managers are desperate to make the leap into CEO consideration.  The temptation to make money and a name by skating at the edge becomes overwhelming.  It is a price for inequality we should not be prepared to pay.