Pirates stock up on goats, cigarettes and other supplies when they return to shore. Photo: CharlesFred (flickr)

Piracy along Somalia's coastline represents a very lucrative business — as the pirates collectively earned an estimated $150 million in 2008 — but what is piracy's effect on Somalia's economy?

Somalia's economy is in a fairly grim state. An estimated 73.4 percent of the country's population lives in general or extreme poverty and the average Somali earns only $600 per year, making Somalia one of the poorest countries in the world.

Fishing used to be one of Somalia's most profitable industries. But as piracy has increased — there were roughly 100 attacks in 2008 — the New York Times reports that foreign ships have become reluctant to brave the waters surrounding Somalia's coastline to buy fish and other exports. The amount of goods coming into Somalia, including aid, has also declined.

Pirate money has also skewed prices. In the town of Garowe, near Somalia's central coast, resident Mohamed Hassan told the BBC that "piracy has a negative impact on several aspects of our life," including a financial one:

They have made life more expensive for ordinary people because they "pump huge amounts of U.S. dollars" into the local economy which results in fluctuations in the exchange rate.

On the other hand, pirates are putting wealth back into the Somali economy — an estimated $1 million to $2 million is made from each captured ship.

Whenever a ship is seized, pirates stock up on sheep, goats, water, fuel, rice, spaghetti, milk, and cigarettes in towns up and down Somalia’s coast. Sugule Dahir, a local shop owner in Eyl, a town just off the coast in central eastern Somalia, feels the incoming money has had a positive impact. He tells ABC News that, because of the pirates, more businesses are beginning to emerge and the general public seems better off. "There are more shops and business is booming because of the piracy. Internet cafes and telephone shops have opened, and people are just happier than before."

Government officials are getting a fair sum of pirate money as well. By allowing the pirates to work in controlled areas, the regional Puntland Government is given shares of the pirate's earnings. About 30 percent of the collected ransom goes directly to government officials, Farah Ismael Eid, a captured pirate, tells Time.

Some Somalis are worse off because of piracy. But it's clear that the pirates do spread the wealth.

The U.S. Navy comes to the assistance of a Taiwanese-flagged fishing trawler been seized by pirates off the coast of Somalia. Photo: Open Democracy (flickr)

After 18 years of civil war, some good news is finally coming from Somalia. The recent election of Sharif Ahmed, a moderate Islamist, as Somalia’s new president brings the country a chance for peace and stability. But the country faces enormous problems and President Ahmed has a mammoth task on his hands — both domestically and internationally.

Perhaps the biggest challenges lay within Somalia’s own borders. Considered as a failed state since the early 1990s, Somalia has seen its worst spate of violence in decades over the past two years: Ethiopian troops invaded the country, at least 10,000 Somalis have been killed and more than one million displaced.

Much of this bloodshed and displacement comes from the poor security conditions and widespread lawlessness spawned by fighting between rival warlords, clans and other armed groups. This lack of national security poses a huge problem for Ahmed’s nascent presidency: Somalia’s two main insurgent groups, Hezbul Islam and Al-Shabaab, control “much of the south of the country” and refuse to recognize the election. Getting Somalia’s clans behind a centralized government is a task that previous Somali leaders have failed to meet.

In a country that has no almost running water or electricity, Ahmed also has numerous humanitarian challenges. The Red Cross considers Somalia's food crisis to be one of the worst in the world. And the country's infrastructure, already-limited agricultural systems and market linkages, has been severely damaged during the continuous internal conflict of past decades. As a result, more than a third of the population depends on food aid. Health care has also been decimated: Mogadishu, Somalia’s capital city of 3.6 million people has only two or three hospitals that barely operate at all.

Providing this critical food and health care will be very difficult, however, until some form of security is established. The government must find a way to ensure that youth have the education and economic opportunities they need so that they have less incentive to take a $15-a-day paycheck to join one of armed groups. But the already-precarious education gap is widening: at least 81 percent of Somalia's population is now illiterate — the highest such rate in Africa — and only 17 percent of Somali children go to school.

A moderate new government headed by an energetic and idealistic president has succeeded in giving Somalis hope — but delivering results is crucial to showing the country’s embattled population that their government is actually making a difference.

It seems obvious that poverty and terrorism are closely interwoven. The search for answers in last week's terrorist attacks in Mumbai has prompted the links between the two to be probed once again.

But how associated are they, really?

Back in 2002, the general consensus was that poverty relief efforts could be a leading tactic in the fight against terror. Since then, however, a number of researchers have taken issue with this correlation, starting with the fact that the 9/11 attacks were carried out by middle-to-upper-class men. (A 2003 paper suggests that terrorist groups may recruit well-educated, well-off members because they can blend into their Western targets.) Harvard professor Alberto Abadie ties the rate of terror events to a nation's political freedom as well as its size, elevation and weather — but not its economic status.

The rationale behind the idea that terrorism can be a by-product of poverty persists because it seems pretty logical. Poverty can surely lead to a sense of societal alienation, which could make people more likely to join a terrorist group. Assuming that is the case, extending the benefits of economic growth to marginalized communities could lessen the threat of terrorism. But is this perceived alienation actually a result of poverty, or something else entirely?

Anecdotally, poverty relief efforts — especially education — appear to be powerful antidotes to terror. A prime example is American Greg Mortenson's efforts to build dozens of schools in remote areas of Afghanistan and Pakistan, which are documented in the book Three Cups of Tea. According to Mortenson, "Education in general is a powerful tool to provide alternatives to the illiterate, impoverished areas that are the recruiting grounds for terror."

With 14,000 terrorist events in 2007 alone, attempts to understand the roots of terrorism aren't mere academic exercises. Correctly determining the true causes of terrorist activity can mean the difference between a successful anti-terror strategy and thousands of lives lost.

The Saudi-owned oil tanker MV Sirius Star is shown at anchor on November 19, 2008, off the coast of Somalia. Photo: William S. Stevens/Reuters, courtesy of Alertnet.org

Ahoy, consumers. Beware of yer pocketbooks. Pirate attacks off the coast of Somalia are up 75 percent this year, threatening price hikes for everything from the gas in your car to the shoes on your feet.

The price of oil increased this week after Somali pirates hijacked a Saudi oil tanker in the Gulf of Aden. British researcher and author Roger Middleton says Asian exporters may be forced to ship their goods the longer route around the Cape of Good Hope to reach European and American shores.

The longer route would add up to three weeks to the delivery of goods from Asia and of oil and gas from the Middle East to European markets. Someone will have to pay for that extra time – very probably the consumer. For Europe and the eastern seaboard of America, this inflation is a real possibility.

The brashness of these modern-day pirates has also forced people to rethink their romantic, Disneyesque notions about pirates — and how desperate the Somali people truly are.