"We have nothing to fear but fear itself" US President Franklin Delano Roosevelt said during the Great Depression, and in doing so, he captured the conundrum of economic recovery. More than anything else, recovery depends on individuals overcoming their fear of the future and taking risks.

Individuals and companies in an economic downturn instinctively reduce their spending, save their money, borrow less and in general, wait for conditions to improve. But the overall economy needs individuals and companies to spend more, borrow money and invest. Only then can the economy expand. Certainly, that has been the lesson for western economies in recent years, although the consumer-led booms of recent years have proven to be unsustainable. Even so, if domestic demand is weak in most economies, growth is unlikely.

For Bermuda, the problem is slightly different. Because Bermuda produces little, stimulating demand is even less effective than it might be in the US or elsewhere. Instead, Bermuda must sell more of the services from which it gets foreign exchange – international business and tourism. Only when foreign exchange comes into the economy can businesses buy goods abroad for local consumers to buy.

For the Government, this means that recovery is dependent on growth in those two sectors, and that can only be done by creating a framework and set of conditions by which they can flourish and succeed. In the case of tourism, this means encouraging hotel development, negotiating sufficient airlift and cruise traffic, and doing what it can to keep costs low so that hotels can offer competitive rates. In international business, where the main ingredients are capital and intellect, it means creating the conditions where capital raising and investing is efficient, and enabling the brightest minds to work in the Bermuda environment.

All of this is getting harder, and aside from the world economic downturn, explains why Bermuda is having economic difficulties. In tourism, cost remains a massive challenge for Bermuda, and it is worrying that inflation spiked in September. Bermuda does not need higher costs now. In international business, the right balance needs to be found between satisfying international regulators while ensuring that regulation does not become stifling to the innovation that has characterised Bermuda. At the same time, enabling the best and the brightest to work in Bermuda means ensuring that immigration and Bermuda's quality of life are inviting. Bermuda has not yet got that right.