Imagine if we had the benefit of having hindsight in every decision we had to make. For instance, as an alternative to purchasing a house in Bermuda during the late 1990s, a better financial option would have been investing that money in Amazon’s initial public offering in 1997. An investment of $100,000 in that business venture, from its inception, would be now worth $110 million.

Today, the mortgage for that house in Bermuda would be either totally or nearly paid off. However, if only that homeowner had the brilliance of hindsight and invested in Amazon instead. They could now not only purchase a house in cash, but they could also buy one in every parish and still have plenty of change left over. I will come back to this later.

There tends to be a lot of criticism hurled towards the leadership of the Government, particularly on the decline of the island’s economy since 2008. Some criticism is indeed warranted, but some is also because those that criticise have the advantage of hindsight.

The biggest level of condemnation against the leaders of the Government is the amount of debt the island has accumulated and the annual cost it takes to service that debt. There are some who have blamed the Government of mismanagement and there are those who wished the Government had reduced the size of the Civil Service.

Let us revisit 2008 and reflect, without knowing what we know today. Preceding this timeline — which was the peak of the island’s economy before the decline — the number of jobs grew from 36,252 in the year 2000 to 40,213 in 2008. Government revenues grew from $623 million to $928 million within the same time span. There was virtually no unemployment and new jobs had to be filled mostly by guest workers. Bermuda’s gross debt outstanding was $345 million, which was 6 per cent of gross domestic product. The economy in Bermuda was flying and on fire.

As we all know, the Great Recession occurred, and growth came to a screeching halt. Although recessions are an inevitable part of the economic cycle, how was one to know at that time the recession would become the worst since the Great Depression in 1929? In my memory, Bermuda experienced recessions in the early 1980s, 1990s and 2000s, and we successfully rode those waves; our economies grew when they ended.

What was different this time — besides the severity of the Great Recession, which caused the biggest global economic contraction since the Second World War — was that the mainstay of our international business, the reinsurance sector, was in the early stages of its own cyclical downturn. Except for perhaps industry insiders, who would have thought the growth engine of Bermuda’s economy would generally remain flat in a soft market for the next decade.

When a single sector that contributes up to 30 per cent of a country’s GDP contracts, then that country will undoubtedly have financial challenges. The tightening of Bermuda’s economy resulted in multiple years of deficits, which subsequently led to increased borrowing to pay the island’s bills. The only way for the Government to have avoided this scenario was to reduce its costs. As up to half of its outpayments are employee-related, this essentially meant making some workers’ jobs within the Government redundant.

Getting back to the IPO of Amazon, this business conglomerate is now the second-biggest retailer in the world with a market capitalisation of $1 trillion. Should the homeowner have invested in Amazon as a start-up rather than buying a house on the island? In hindsight, of course, yes. However, how was one to know this unknown company would eventually become a seller of everything and its business model would change the way we all shop?

According to a Nasdaq analysis, companies that have gone public since the 1980s have a success rate of only 20 per cent. Also, if you are not aware, Amazon started out as an online bookseller when the internet was accessed over dial-up and when e-commerce was in its infancy. Other than Jeff Bezos, the founder of Amazon, who would have taken that unknown risk with their money that more than likely took many years to save?

At the end of the day, decisions are made based on the circumstances at that time. Should the Government have reduced its headcount and costs, and risk further destabilising the island at that challenging time? Surely, the Government would have drawn the ire and protests from the unions and their members, along with plenty of criticism from the Opposition party. Recognising also that the Opposition party itself had every opportunity to carry out this politically difficult task during its own term as leaders of the country.

Fast forward to today, economic activity is growing on the island and the reinsurance sector has been operating in a hard market since about 2020. The only reason why government budgets have been at a deficit over the past few years — except for during the pandemic — is because of the high-debt interest rate costs Bermuda has had to repay.

The noble aim of not wanting to make people redundant during a period when unemployment was as high as 9 per cent has had an unintended consequence of putting Bermuda in a tenuous financial position. Although it is understandable why both political parties did not persuade the Civil Service to downsize, they might have acted differently if they had the brilliance of hindsight.

That said, today is tomorrow’s hindsight. One does not have the benefit of a crystal ball, but foresight gives an opportunity to be better prepared for the future. The Government must prepare, based on what we know today, and learn from our economic challenges over the past 15 years.

Today, we know the reinsurance sector has hard and soft markets, and the latter can last a decade, which negatively affects the island and creates a falling-domino effect on other sectors.

We know sustained years of deficits and debt accumulation leave the island in a vulnerable state. It causes the Government to be hamstrung to deal with emergencies and crises if they occur, and it gives the Government less leverage and clout at the negotiating table with airport and hotel developers and investors.

We know if the Government does not have financial wiggle room in its budget, it lessens the flexibility to stimulate the economy, lower taxes and lower the cost of living.

We know after years of trying that it is very difficult to further diversify our economy. For the foreseeable future, we will continue to depend heavily on international business and tourism.

Even with what is known, leaders of the Government would probably still hesitate in making these difficult decisions. No political party would want the Civil Service to be reduced during their watch in fear of fallout. Therefore, the Government must implement steps to help save the country from future financial stress.

Here are a few thoughts on the steps that should be considered:

• Modify the Government Loans Act by adding fiscal rules to help manage the country’s deficit and debt in a more sustainable manner. As an example, European Union law requires its member countries to keep their deficit below 3 per cent of GDP and debt below 60 per cent. Whether this guideline is suitable for Bermuda is for economists to figure out. I do know, however, that the EU has its own currency and has far more fiscal flexibility than we do. Our metrics may have to be stricter owing to the lack of diversity in our economy

• Create a new Civil Service organisation blueprint that includes only essential services. I have already pointed out in a previous op-ed how some of the Bermuda Post Office’s functions are no longer as essential as they used to be before the advent of digital communications

• Do not replace employees that have retired unless the role of that employee is considered essential

• Methodically transition to the new Civil Service organisation when the economy is growing and there is a requirement for new jobs on the island. This would be the ideal time for non-essential job functions to be absorbed into the private sector

Evan Esar once wrote, “Hindsight is good, foresight is better; but second sight is best of all”. The Government must understand what has led to our precarious financial situation to make better decisions in the future. We have a debt to pay down, unfunded liabilities to fund and long-term temporary infrastructure to be permanently replaced. We can do these things only if the country lives within its means.

• Malcolm Raynor has worked in the telecommunications industry in Bermuda for more than 30 years. Benefiting from Cable & Wireless’s internal training and education programmes held in Bermuda, Barbados, St Lucia (The University of the West Indies) and Britain, he rose to the level as senior vice-president. An independent thinker possessing a moderate ideology, his opinions are influenced by principle, data and trends