This is the third in an eight-part series that takes an incisive look at the Bermuda economy, historically from our humble beginnings to the 21st century and the challenges faced by the Progressive Labour Party government

It was as early as 1673 that Bermudians sailed south and claimed the Turks Islands, laying the foundation of the Bermuda Salt Trade.

By 1700, Bermudians had taken possession of the Turks Islands where they sailed to rake salt. But at the outbreak of the War of Spanish Succession (1701-1714), many were forced to stay at home to defend the island against any Spanish invasion. But many continued as mariners, signing on as crew on the British and Dutch ships, which continued the privateering activities against the Spanish fleet.

The Governor, Benjamin Bennett, (1701-1713) promoted the enterprise. By 1701, a virtual state of war existed between Bermuda and the Bahamas, which lasted through much of the 18th century over the salt pans of Grand Turk. When the Bermudian sloop Seaflower was seized by the Bahamians in 1701, Bennett’s response was to issue Letters of Marque to Bermudian vessels.

The years 1706 through 1710 featured the absence of Bermudians from the salt pans in the Turks. The salt pans were taken over in 1706 by the French and the Spanish who briefly captured the Turks & Caicos Islands from the Bermudians. Four years later, the Bermudian privateering ship, the Rose, under the command of Captain Lewis Middleton, attacked a Spanish and a French privateer holding a captive English vessel at Turks, defeated the two enemy vessels and then cleared out the 30-man garrison left by the Spanish and French.

In 1711, Bermuda was so concerned about a slave rebellion that an Order in Council was made to limit the number of whites leaving the island on sea trips to six. This meant that most of the ship crews were slaves or free blacks.

In the year 1715-16, there was activity by Captain Henry Jennings as another Bermuda pirate/privateer. His family had arrived in Bermuda as early as 1622 and owned most of Smith’s Parish. Jennings operated between Jamaica, where he also owned large estates, New Providence, Florida and Bermuda.

Jennings was first hired by Spain to track down pirates. He was armed by the Governor of Jamaica, whereupon he turned against the Spanish, plundered their salvaging depot in Florida and stole £87,000 worth of salvaged goods. While he was about it, he captured a French ship, gathering another 60,000 “pieces of eight”, before accepting a pardon and returning to Bermuda in retirement.

Colonists in British North America were not allowed to mint money of their own, even though they often ran out of English coins to use in day-to-day business. Instead, they resorted to using whatever coinage they could get their hands on. The most common coin used during this time was the Spanish silver dollar, worth eight “reales”, a unit of currency in Spain. Americans used foreign money until 1857, when the United States Government passed a law forbidding it.

Jennings went to sea again in 1745 during the Austrian War of Succession and was captured by the Spanish. The Austrian War of Succession subsumed the War of Jenkins’ Ear.

The War of Jenkins’ Ear, from 1739 to 1748, which was known also as Guerra del Asiento in Spain, was a conflict between Britain and Spain lasting from 1739 to 1748, with major operations largely ended by 1742. It is referred to as the War of Jenkins’ Ear because Robert Jenkins, as the captain of an English merchant ship, lost his ear when his ship was boarded by Spanish Coastguards in 1731.

In 1741, the Spanish privateer Francisco López landed a raiding party at Boat Bay in Southampton Parish. Local fishing boats were taken and towed behind their ship. Defensive measures were unsuccessful and the boats were lost. The boats and the retreating Spanish were never heard of again.

On the other hand, in 1746 so many prisoners of war were brought in by Bermudian privateers that the only place available to accommodate them was Paget Fort. They were guarded by locally quartered troops and had a food allowance of one shilling a day.

At least 15 Bermudian privateers operated in the 1740s. By 1750, a ship census showed that the size of the Bermuda fleet had grown and diversified to 115 vessels: 81 sloops, 14 schooners, 18 brigantines and two others.

The American Revolutionary War, from 1775 to 1783, became global, involving not only the Patriots of North America — as the revolutionaries were called — but also their French, Spanish and Dutch allies. It did not speak to the half a million persons that were held in slavery or the 100,000 loyalists who were compelled to leave the new country.

By the time of the American Revolution, the wars in Europe also signalled the change in status of the American colonies. The War of Jenkins’ Ear and the War of the Austrian Succession resulted in heavy British casualties in North America; the raising of Oglethorpe’s Regiment of Foot from the Colonial American Troops to fight outside America was a signal that Americans were entering the world stage in their own right rather than as mere British colonials.

After 1742, the War of Jenkins’ Ear was subsumed by the wider War of the Austrian Succession, which involved most of the powers of Europe. Peace arrived with the Treaty of Aix-la-Chapelle in 1748. There were other signs of the revolutionary storm. As early as 1651, pursuant to its mercantilist policy, the British introduced the Navigation Acts, among others, which were intended to enrich only Great Britain while barring trade with other nations.

Every Bermudian schoolboy knows the story of how Bermudians stole the keys to the English gunpowder from under the Governor’s pillow to sell it to George Washington in 1775. But what he isn’t always told is that it was American privateering that beat the British navy. And it was Bermudian shipbuilders and their Bermuda sloops that did the trick for the American Revolution.

By 1767, the British were responding to the increasing role of the Royal Navy by establishing the North American Station in Halifax until it eventually moved to Bermuda in 1794.

Even before the outbreak of war between the United States and Britain, Bermuda signalled her independent interest in 1774 by stripping the Industry, which got stranded on the northern rocks.

The astute observer was not surprised when the American Revolutionary War was upon us. With the outbreak of the war, the Americans decided to rely on privateers rather than attempt to build their own navy. In addition to the normal supplies, which were always on demand by the Americans, there was now a demand for military supplies. This put a very heavy demand on the Bermuda sloop.

The Bermudians were forced to escape the various regulations imposed by both the British and the Americans to continue to carry on business. Eustatia Island in the British Virgin Islands had become one of the ports where, like a bazaar, contraband could be bought and sold. Bermudians were some of the main customers through whom they could carry on their business, including the sale of the vessels themselves.

It is estimated that during the hostilities more than 1,000 ships were built in the islands. In 1780 alone, it is believed that there were 100 ships in process of being built in Bermuda. In addition to ships, Bermudians were heavily involved in moving goods in and out of American ports. The Caribbean Sea was simply crawling with privateers sailing the Bermuda sloop. And, to be fair, for the Bermudians it didn’t always matter which side you were helping, as was the case with many Americans.

There was one American, Bridger Goodrich, who had no problems with loyalty. He got himself a privateering licence in Bermuda and proceeded to take full advantage of robbing American ships. There were other Bermudians who joined him.

One incident involved an American naval captain, who was ordered to take his ship out of Boston Harbour to eliminate a pair of Bermudian privateering vessels that were assisting the Royal Navy. He returned frustrated, saying that “the Bermudians sailed their ships two feet for every one of ours”.

In 1777, there was one attack on Bermuda itself, but it was carried out by Bermudians. Two brothers attacked with two sloops. They managed to come ashore and inflicted some damage on the fort at Wreck Hill, spiking its guns before sailing off.

One ironic situation arose when the American Navy caught Captain George Kidd, on the Bermudian privateer Regulator off the coast of the Carolinas in the lee. The ship had been manned by 70 slaves who were offered their freedom by a Boston court. The men chose to be treated as prisoners of war. When they were shipped to New York on board the Duxbury, they took over the ship and sailed it back to Bermuda.

• Arthur Hodgson is a former Cabinet minister, Rhodes Scholar and graduate of Oxford University in England, where he studied philosophy, politics and economics