This is the fourth 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

Living on a tiny island isolated in the middle of the Atlantic, Bermudians had long since learnt to survive by their wits. At the outbreak of hostilities in the American Revolution, we were already ahead of the game. Just as Bermuda had saved the settlement at Jamestown in 1609, so she was able to lay the cornerstone for the new nation of America in 1775.

Historians typically begin their histories of the American Revolution with the Seven Years’ War in 1763. The North American theatre of the Seven Years’ War is commonly known as the French and Indian War, with the British and French in dispute over their claims to North America.

It is interesting that the first salvo of the war was fired by General George Washington while fighting for the British in 1754 in Pennsylvania.

Of more direct interest to Bermuda, in 1765 the Americans formed the “Sons of Liberty”. They demonstrated publicly, boycotted, terrorised and burnt the Courts of the Admiralty. It became impossible for the law to be administered.

Several colonial legislatures called for united action and nine colonies sent delegates to the Stamp Act Congress in New York City in October 1765. In February 1768, the Massachusetts legislature sent out a circular letter calling for united action.

A new government in London withdrew the taxes in 1770, but maintained its right to tax. This brought a cessation to most of the protests, but by 1772 the most radical of the patriots, such as Samuel Adams, expanded their agitation.

Adams encouraged the Patriots in all 13 colonies to set up Committees of Correspondence to keep the community informed of dangers either legislative or executive, and concerted measures of public good. These committees, excluding the loyalists, consisted of the leading citizens of local communities and provided the shadow governments in each locality. Between 7,000 and 8,000 Patriots served on “Committees of Correspondence” at the colonial and local levels linking the communities.

In addition to the Committees of Correspondence, it became usual for the appointment of two additional committees: Committees of Inspection, also known as committees of observation, and Committees of Safety, which were executive bodies that cemented the revolution into a unified purpose. No doubt, the committees were the forerunner to the Committee for Public Safety in the later French Revolution and to the populist tendencies in American politics today.

In the meantime, the American Continental Congress decided to put an embargo on all trade with the colonies remaining loyal to the King. Bermudians unsuccessfully used salt as a bargaining chip to gain an exception to the embargo. There was no deal.

Nicholas Cooke, the Governor of Rhode Island, wrote to Washington on August 11, 1775, advising him that he knew of contacts between the Bermudians and the Continental Congress in Philadelphia, whereby they were discussing a deal to exchange food for gunpowder. He was willing to arm the sloop Katy under the command of Abraham Whipple to retrieve the powder with or without the aid of the Bermudians.

Gunpowder proved to be a much more attractive commodity to the Americans than salt.

At the beginning of September 1775, Washington wrote to the people of Bermuda requesting a deal on the gunpowder.

Of course, unbeknown to the commander-in-chief, Bermuda had made its move and the gunpowder was already under his command.

In 1775, the appointed Governor of Bermuda was George James Bruere. He had been a lieutenant-colonel in the British army and had a son that died at the Battle of Bunker Hill. His loyalty was to the King.

Henry Tucker, on the other hand, was the patriarch of his influential family and a leader in the Bermuda Assembly. He had written of his opposition to British policy towards the North American colonies. Two of his sons were in America and a third one living in Bermuda was married to one of Bruere’s nine children.

St George’s Tucker, one of Henry’s two sons living in America, was instructed by his father to make contact with Thomas Jefferson, who had been elected a member of a Committee of Safety, which commissioned the Lady Catherine to sail to Bermuda.

In fact, news of the theft of the gunpowder appeared in public print before Washington wrote his letter. The Katy did sail to Bermuda but returned empty-handed, except that the captain was still carrying Washington’s letter. Bruere wrote an account of the affair as to how the powder magazine was broken into and the powder stolen.

Despite the dominance of privateering during the 18th century, many Bermudians still depended on the more mundane occupation of salt raking as their seaborne occupation.

In 1764, a French flotilla from Santo Domingo attacked Bermudian salt rakers in the Turks Islands, destroyed their houses and effects, and carried them off as prisoners. Bermudians had been salt rakers there since 1678, but this attack forced the British Government in London to look into the real ownership of the Turks Islands. They were deemed part of the British Crown, but part of the colony of the Bahamas. Bermudians living there were given advance notice to quit.

Despite the profitability of the sea, interest in the land remained alive. A Frenchman, Isaac Chauvet, made an application to the legislature in 1763 for financial assistance in establishing a wine industry, but to no avail.

The American War of 1812 was to be the encore of Bermudian privateering, which had died out after the 1790s, partly because of the build-up of the naval bases in Bermuda, which reduced the admiralty’s reliance on privateers in the Western Atlantic, and partly because of successful American legal suits, and claims for damages pressed against British privateers — a large portion of which was aimed squarely at the Bermudians.

During the course of the War of 1812, Bermudian privateers were to capture 298 ships — the total captures by all British naval and privateering vessels between the Great Lakes and the West Indies was 1,593 vessels. Nevertheless, the Revolutionary War, together with the War of 1812 — the attack on Washington being launched from Bermuda — constituted the dying gasps of Bermuda’s life on the sea.

Now that the American colonies had gone, Bermuda took on a greater military significance. Britannia Rules the Waves, written in 1740, could hardly be sung convincingly if Britain allowed the fledgeling nation of America to control the shipping lanes of the Atlantic.

Bermuda was ideally located between Canada, which Britain still controlled, and the Caribbean — to say nothing of Spanish interest in Florida. The significance of Bermuda was readily tested with the outbreak of the American civil war between the North and the South.

Bermuda proved to be ideally located as an assembly point for blockade running, with war materials for the South as well as an assembly point for ships carrying cotton to Europe from the southern cotton plantations. It is said that St George’s was literally crawling with spies from both sides.

In 1811, the Royal Navy began the build-up of its naval facility on Ireland Island. The work had been started by surveying the ocean floor around the island to discover the deepwater cuts and channels through the reefs. Impetus was given to this project, as it also served to enhance the use of Bermuda’s new capital and port, which had moved from the Town of St George to the City of Hamilton. In charting the channels, access was given not only to the new Dockyard but also to Hamilton’s harbour.

The decision to make Hamilton Bermuda’s new capital was made primarily because the city was centrally located as opposed to the Olde Towne, which was located at the extreme eastern end of the island. Hamilton was founded in 1790 and became the official capital in 1815.

To guard the naval facility, the British army built a large garrison. Thus the island became well fortified. In 1816, the work of fortifying Dockyard was placed in the hands of Colonel James Arnold, the son of Benedict Arnold, of American Revolutionary War fame, who had the responsibility of fortifying West Point before he switched sides and joined the British.

Although it must be admitted that much of the military infrastructure had not been well thought out and readily became useless, the building was good for the Bermuda economy, as it gave support to a return to agriculture after our heyday on the seas.

While the steamship put Bermuda’s sailing sloops out of business, it had the benefit of providing a gateway for our early market garden crops, which were supplied to New York and the United States East Coast — the Bermuda onion and Bermuda Easter lily becoming particularly famous.

The Bermuda onion is a sweet and mild variety, which first came to the island as early as 1616. It is now a well-known variety around the world. US import tariffs and competition from Texas put Bermuda’s onion exports in decline. Texas even has a county called Bermuda.

Of course the 1930 Smoot-Hawley Tariff Act also negatively affected Bermuda’s agriculture export market gardening to New York.

Bermuda agriculture does best during the winter months. Bermuda summers tend to be too dry for kitchen vegetables. This is not because of a lack of rain in summer, but rather the heat, which quickly evaporates the rainwater. During the days of salt raking, Bermudians tended to go south during the summer months to Turks; not only because farming was less productive in Bermuda, but also because the summer heat evaporated the water from the salt pans more rapidly.

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