In this given assignment, the case study relates to the Barbary Pirates. The situation over here is that the Americans ship has been captured by the pirates, now we are given multiple solutions, and we have to find the cost of each solution. It shows the conversation between U.S. diplomat in London, Adams and U.S. ambassador to France, Jefferson. The conversation relates to the solution each person has offered and the analysis behind them.
We have to calculate the cost of not doing anything to the give situation, cost of fighting the war, and cost of negotiation with the Barbary States. We also have to analysis which of them is correct in their assessment of the situation, and form a foreign policy suitable for the Americans.
1. Calculation of cost by Adam:
Negotiate with the Barbary state: Option 1
Cost incurred if they negotiate with the Barbary would be: 2000 Pound sterling per state i.e. 2000 * 5 = 10000
Trade will be protected so the cost of protection is: NIL
Wage War against Barbary State: Option 2
Option a: If we do not repair our fleet:
Cost of Interest: 30000
Cost of Fleet: 450000/10 = 45000
Total Cost: 75000 Pound Sterling
Option b: If we repair our fleet:
Cost of Interest: 30000
Annual repair expense: 22500
Total Cost: 52500 Pound Sterling
Repairing the Fleet is a better option.
Do Nothing: Option 3
Cost of trade without Protection: 30000 Pound Sterling
Of all the above the best option is to sign Treaty with the Barbary States, and carry on with the trade.
2. Derivation of 22500 Pound Sterling:
Number of Guns on the fleet: 150
Number of guns to be kept in the fleet: 150/2 = 75
Maintenance cost of Fleet: 300 Pound Sterling Per gun
Total Maintenance Cost: 75 * 300 = 22500 Pound Sterling
According to Jefferson the cost of maintenance is much lower than the cost of Building the Fleet at 45000 Pound Sterling; hence it is right to say that the cost of Algerian war is 22500 Pound Sterling.
3. Yes, I agree with Jefferson’s logic. It compares the cost of building with the cost of maintenance the fleet. Cost of building a new one is 450000 pound sterling, while cost of building the original fleet would include only the repair cost over the time of fleet to be kept i.e. 10 years, therefore cost of building would be: 150 * 300 * 10 = 450000 Pound Sterling. As per Jefferson we can build a new one immediately if we burned the navy, the cost would be similar of building and repairing.
4. Annual Cost of Fighting the pirate:
Cost of operating Expense: $ 500000
Depreciation Cost of Fleet: 45000 Pound Sterling
Cost of building a Fleet: 450000
Number of year: 10
Depreciation: Cost of building / number of years
450000 / 10 = 45000
5. As per the letter of Adams to Jefferson, Adam does not agree with the cost of Peace with the 5 states, according to him it will cost two or three thousand per state, while Jefferson believe that it will cost 5 thousand per state. While they agree with the fact that it will cost half a Million sterling pound to fight the Barbary Pirates, without any protection to their trade.
Adams has stated the cost of maintaining a Treaty with the 5 states, according to him if we start a war it will cost more than the amount they would be paying under a Treaty of Peace. As per him the cost of war without protection is 30000 Pound Sterling, while the Treaty of Peace will only cost 10000 or 15000 Pound Sterling.
Adams believe that cost of war will be 22500 Pound sterling, according to him the cost of fleet, carrying the guns, will be the only relevant cost for the war. The repair cost is better than the cost of building a fleet, hence he considers only that cost to be relevant for the war.
As per the above analysis, one should consider the solution for a better policy, for current situation they should maintain a Treaty of Peace with the 5 states, and on the other hand they should maintain their navy over the time, therefore in future they don’t have to be in a compromising position. In the meantime there will be protected from pirates. They should also maintain a proper relationship with the British army.
6. Non- Monetary Factors relevant for fighting the Pirate:
If they fight the pirates, their trade would be unprotected from the pirates, which might result in the destruction of market share of the Americans. If the market share of trading is destructed, economically they will be hampered.
Fighting will cause an increase in the number of deaths of their soldier, as well as pollution will lead to medical health problem of the people.
Fighting will cause the destruction of the property.
Non – Monetary Factors for not fighting the Pirates:
If the Americans enter into a treaty with the pirates it will lead to more rise in the number of pirates, it will be visible to the people that the navy or army is not strong enough to take the pirates down. This will result in increase in the number of pirates, as more and more people will consider it easy to threat the country.
If Americans don’t fight the pirate, there will be a constant threat over their head. They cannot depend on mere Treaty for safety. By fighting the pirates, they can establish their power.
In this assignment, we were given a case study of Barbary Pirates, and how to handle the situation against them. We were given a number of situation and the cost that would arise in those situations. I have done those calculations, and as per my calculation, following results has been derived:
Fight The Pirates
Sign Treaty of Peace
To conclude, the best way to handle the Barbary Pirate case is by building an army, along with signing a Treaty to protect the trade for the time being.
From this assignment, I got to learn different cost, such as relevant, irrelevant cost, interest cost etc.
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