Bermuda’s history has been inextricably tied to its economy. With no natural resources and situated 700 miles from the nearest land, its people have always known that economic growth is not just desirable — it is a matter of survival.

From early efforts to grow tobacco in the 1600s to the salt trade and shipbuilding in the 1700s and 1900s, to the exploitation of agriculture and the construction of military bases in the 1800s and 1900s, to the development of tourism and then the international business sector in the 1900s and the early part of this millennium, Bermuda has been able to move from one industry to another.

These transitions were neither seamless nor inevitable.

The advent of steam engines in the 19th century sounded the death knell for shipbuilding and the ability of small islands like Bermuda to oversee large trading networks.

Similarly, the sight of crates of rotting onions sitting on the Hamilton docks with their US export market cut off by US protectionism in the early 1930s was a vivid demonstration that economic change can be painful and that Bermuda is vulnerable to dramatic changes of course over which it has no control.

As much as we would like to determine our own destiny, fate, as Bermuda’s motto says, sometimes determines our future for us. Since the 2008 financial crisis, Bermuda has been at a similar economic crossroads to those that came before. And charting future economic directions is as difficult now as it was then; possibly more so in an increasingly interconnected world.

Despite the best efforts of the Bermuda Tourism Authority, it is impossible for Bermuda to return to tourism’s heyday of the 1970s and 1980s, although a smaller and more focused industry can be viable.

Similarly, the rapid growth of international business that occurred in the 1990s and early 2000s is over. While reinsurance should remain a critical sector for Bermuda, many of international business’s other legs; trusts, banking, mutual fund administration and investing, are much smaller than they were before 2008.

There are many reasons for these changes. Some are global and others, notably the long uncertainty over immigration, but also the island’s high costs and rising tax burden for employers, are within our means to change, but are not without short-term political costs.

Nonetheless, the diagnosis is clear — Bermuda’s economy is sickly.

Politicians and business leaders of all persuasions are generally agreed on the need for diversification. The problem comes not in the diagnosis but in the cure — what industry or industries can complement international business and tourism?

The first decision must be determining to what degree governments and policymakers should try to pick individual industries, as opposed to the more hands-off approach of creating the conditions in which different types of business can thrive and then to let the market decide who will do that.

This is not to say that Government should have no role; indeed, Bermuda’s historic successes have often had public involvement, including the controversial creation of Tucker’s Town through forced purchases while insurance has been a model of co-operation between Government, regulators and industry.

However, other efforts have been less successful and argue against governments picking winners and losers. The Government’s attempt to create a free port after the Royal Navy closed the Dockyard was an abject failure. The jury is still out on the Premier’s efforts to turn Bermuda into a financial technology centre, but despite massive efforts, there has not been less growth than hoped for.

Instead, Government needs to consider what general criteria Bermuda needs to look for in a successful industry and what needs to change to give these industries the best chance of success and in turn to generate jobs and opportunities for Bermudians.

Finance minister Curtis Dickinson’s announcement that the 60:40 ownership rule is to be reversed is one example of this, although early reaction shows that this is not as simple as it seems.

One Bermuda Alliance finance minister, ET “Bob” Richards, made a similar Budget announcement in 2014 and then found the change was harder to implement than he thought — Mr Burt announced a review two years ago as well. What this demonstrates is that change is difficult when people are not sure what the future holds.

Bermuda also needs to recognise that work is changing dramatically as technology and automation disrupt more and more industries. Some repetitive jobs are already endangered or disappearing, there are fewer receptionists, personal assistants, typists or filing clerks than there were in offices 20 years ago, but increasingly more skilled, but still repetitive jobs will disappear as well.

What will be left are highly skilled and highly creative jobs, along with relatively low-skilled jobs that cannot necessarily be easily carried out by a machine, and this means that adaptable employees with transferable skills will be in growing demand.

This is not an altogether bad thing for Bermuda given its limited population, but it does mean that Bermuda and Bermudians must invest heavily in education and training or risk being left behind. In general, Bermuda needs to attract industries that do not require high levels of labour, because of the island’s small population and its high costs.

If a Bermudian company is depending on low labour costs for its competitive advantage, it is likely doomed and this is the major challenge for tourism which remains a labour-intensive industry.

Bermuda still has many advantages, notably its geography, poised at the “eye of all trade” to borrow the book title, its historic application of light-touch regulation and co-operation between business and government, its flexibility and ability to change quickly as circumstances change, and its traditional approach to low taxation.

However, some of these advantages have eroded over time. While it continues to have an advantageous position, its embrace of regulation and compliance has sometimes been overenthusiastic compared to other jurisdictions, while pressure on its tax system and the need to restore balanced budgets have also made Bermuda less attractive.

Then, too, the Bermuda Government has become more of a stumbling block than an enabler. Decisions can take months and permits for businesses can take months to be approved. More broadly, the Government’s own size is the main reason for tax rises and needs to be contained.

So what industries should Bermuda pursue? Premier Burt’s arguments for financial technology made sense, given that this is indeed a low-labour industry and is also likely to be at the heart of economic change. So why has it not taken off?

In part because of Bermuda’s own lack of skilled labour and because its IT infrastructure is limited and, as has been reported, among the most expensive in the world. Limited tax breaks and some immigration concessions may not be enough to solve those problems.

But more focused education, government support for faster internet speeds and duty breaks for IT equipment would all help.

Running in parallel with this should be the effort to pursue other progressive industries such as alternative energy and in this context, last week’s Budget is welcome.

This is not simply a matter of helping to arrest climate change, although that would be in Bermuda’s own interests and worth it on its own, but also because the purchase of oil is a tremendous drain on Bermuda’s foreign exchange reserves. While this would not be a foreign exchange earner, it would be equally beneficial by reducing foreign exchange outflows.

Bermuda can also look to encourage other international businesses that are well suited to the island, especially those that are genuinely international in nature, as opposed to being primarily active in one or two countries.

Natural fits for this are global transport businesses like shipping and logistics businesses and international communications companies.

Bermuda can also be a home for family offices of high-net-worth individuals, and again, the Budget highlights this as a growth area.

While some of these industries will need specific legislation and policy changes to be successful, broader policy prescriptions are also needed.

These include better education, especially for information technology, better and more affordable infrastructure, reduced taxation for imports and for employment, more encouragement for foreign direct investment and yes, relaxed immigration policies.

Bermuda should not consider finding a replacement for international business or tourism, but other industries that will help Bermuda to diversify and be less vulnerable to a decline in a core industry.

Bermuda also needs to dispense with the idea that when a non-Bermudian comes to the island to work, they are preventing a Bermudian from getting a job. Bermuda needs foreign direct investment and the opportunities for investment improve when investors know they have a stake in the future of the community. Bermuda needs to accept the reality that it is no longer in a position to dictate terms to investors.

For that reason, relaxing the 60:40 rule may help. However, some care needs to be taken with this, especially for Bermudian small-business owners who can have years of effort upended by unscrupulous new entrants into business sectors.

Nonetheless, with foreign direct investment, Bermuda’s economy can grow and all members of the community can benefit. Without it, Bermuda is doomed to continuous stagnation or worse.