The fifth in a multipart series on sustainable development in Bermuda.

The 9/11 terror attacks on the United States had an instantaneous, twofold impact on Bermuda.

The global tourism industry sustained catastrophic collateral damage when hijackers using jetliners as makeshift guided missiles reduced the World Trade Center and a wing of the Pentagon to smoking rubble. Tourism-dependent sectors of Bermuda’s economy effectively came to a standstill in the immediate wake of the tragedies in New York and Washington DC on September 11, 2001.

But catastrophe re/insurance and related lines, by definition, feed off catastrophe. And the Bermuda market reacted nimbly and effectively to the unprecedented spike in demand for additional capacity in the aftermath of 9/11. Ten major new re/insurance start-ups were incorporated in Bermuda in the months following the attacks with total equity capital of almost $9 billion. The Financial Times reported this was the first time in the history of the global industry so much capital had responded so rapidly to a particular event.

The consequences for Bermuda were sudden, profound and far-reaching. The wave of new companies setting up on the Island and the influx of newcomers required to man them created spiralling demand for housing and office space and had a secondary impact on everything from the availability of private school places to boat moorings. As the wage differentials between those employed in the international and domestic sectors of the economy became increasingly pronounced, a classic inflationary cycle came into play: far too much money was in pursuit of far too few resources.

Rents skyrocketed. So did prices as Bermudians in less well-paid fields attempted to remain competitive by passing on their increased costs in the form of increased fees, fares or wage demands. The cost of living inevitably soared. Bermudians in a position to benefit from this post-9/11 boom — either those employed directly by re/insurance and its support industries or with large financial stakes in, say, real estate or construction — prospered mightily. The rich grew enormously richer. The middle class grew more squeezed and resentful. And the disaffected and economically marginalised grew increasingly disenchanted.

A delayed but predictable form of culture shock finally took hold. There was full employment — over-employment, even, given the unending demand for foreign labour in the key driver of our economy. But there were also increasing tensions between Bermudians and the new power players of their economy along with mutual incomprehension and mutual misunderstandings.

Many Bermudians found themselves running as fast as they could just to stay in the same place in this fast-paced, high-priced new world. And we looked on aghast as the old, gentle ways which had helped to sustain a tourism-driven economy were rapidly submerged in the great sea of global commerce we had plunged into with too much haste and too little forethought.

Those in the international sector, meanwhile, were perplexed by what they perceived as a growing lack of appreciation among rank-and-file Bermudians despite the fact they had provided the Island with a Rolls-Royce economic engine. They were shouldering an increasing share of the Bermuda tax burden, employing a growing number of Bermudians and also contributing prodigiously to schools, charitable and cultural organisations and other social and community undertakings. But too often, they believed, suspicious Bermudians viewed them as intrusive and unwanted carpetbaggers. They weren’t entirely mistaken. We had invited the industry into the Island following Senate ratification of the US-Bermuda Tax Treaty in 1986. But the red carpet had been removed and re/insurers and their satellite operations now found themselves increasingly hog-tied by Bermudian bureaucratic red tape.

Our muddle-through approach to adapting to the needs of our new economy was producing predictably muddled results, many of them not entirely satisfactory to either our international clientele or Bermudians.

Bermuda needs to earn in the region of $10 million per week to feed and clothe ourselves. The Island exports nothing except a reputation for good weather, beautiful natural amenities and a favourable tax regime and imports almost everything. Which means we must pay with foreign exchange, earned either through servicing international companies based on the Island or visitors.

The international sector had gained a seemingly unstoppable momentum after 9/11, one accelerated by another, post-Hurricane Katrina growth spurt in 2005. The remaining vestiges of the old tourism infrastructure had concurrently imploded. So the Island had become, in every sense, a hostage to the fortunes of re/insurance. Ensuring the industry’s sustainability should have become our overriding imperative, certainly after 2001 — along with ensuring the ability of our own people to sustain themselves in this unfamiliar new economic environment.

We failed on both counts.

At much the same time sustainability was becoming a buzzword if not an actual policy priority in government circles, one of the Island’s more reliably insightful commentators cast a wary and prophetic eye toward an uncertain future.

Writing in 2005, when the economic boom was in full swing and showed no obvious signs of abating, he said: “Bermuda must now march to a new and different tune. (And) if Bermuda doesn’t like the situation we find ourselves in, Bermuda will have to lump it. It is all too easy for the kind of business now forming the basis of our prosperity to move out, almost overnight, if the Bermuda climate becomes inimical. We have some control, but not much, over our internal ability to support this economy. We have no control whatever — and never will — over the larger forces that govern this economic world ….

“Sustainable development is not really the question facing Bermuda. By ourselves we are already incapable of sustaining the development we have. If the existing overdevelopment vanishes in a puff of smoke, we will be unable to sustain its loss. The future, at least for most of our younger generation, looks bleak indeed.”

Three years later we discovered just how bleak.