Last week, former Premier Sir David Gibbons warned that Bermuda had to change the structure of its economy or it would suffer from serious unemployment. The following is the full text of Sir David's speech.

I appreciate this opportunity to share some thoughts this morning.

It has been almost two years since I had the pleasure of speaking at your annual luncheon, and in the interim we have, as forecast, witnessed several business closures and takeovers, and I suggest to you that more will come.

Some 40 years ago, Professor Richardson was commissioned by the Bank to review the economic position in Bermuda and to identify the appropriate approach to economic development in the postwar years. His analysis was remarkably prescient.

At that time he set a target of four percent annual growth in the GDP and this average was largely achieved over the ensuing decades -- driven by a growth in Tourism during the `50s and '60s and by international business in the '70s.

Regrettably, this record of economic growth slowed and eventually terminated by the end of the '80s.

I mention this because economic growth is vital to progress in a democratic society.

In his new book, "The Good Society'', Professor Galbraith of Harvard argues, and I quote: "A good society must have substantial and reliable economic growth -- a substantial and reliable increase in production and employment from year to year. This reflects the needs and desires of a people who seek to enjoy greater economic wellbeing.'' Today, there are new storms whipping across the world, gusts of innovation reshaping the economies of the world and of our own country. Those winds will not subside. The winds of change bring tremendous opportunities but they have also wreaked havoc on many families and businesses alike.

If there is anywhere on the globe where people understand storms, it is on our own Bermuda. We live constantly surrounded by the sea and wind. We understand the seasons and the dangers they bring. We are prepared to meet those dangers.

We know what to do and we are resilient. We Bermudians know we cannot stop the storms so we have learned to cope, to survive and to prosper despite the danger.

The central ambition of postwar society has been to create ever expanding prosperity. Among the free market democracies, we have been remarkably successful in achieving a somewhat bumpy progress toward that goal. The key has been productivity.

For instance, the number of people employed in manufacturing in the United States is about the same level as at the end of World War Two. But those people are producing goods worth five times as much in constant dollars.

That's a 500 percent increase in productivity.

It should be noted that the workers aren't making the same things and they certainly are not working as they were 50 years ago -- in huge, repetitive assembly lines, overseen by layers of supervisors who reported to layers of upper management.

You and I have read the headlines over the last few years -- ATT or some other well-known multinational lays off 10,000 workers at this location, 12,000 at that location -- the news arrives, is digested and on we go. But these dismissals begin to add up. The Economist reported two weeks ago that IBM dismissed a total of 180,000 over the last two years. And these were, in the main, middle-level managers. Good, solid workers who were earning good, solid salaries.

Jobs disappear but people do not. Families do not. And that is a fact -- the impact on people -- which should concern us all as citizens. The smartest, most successful companies in the world are engaged in painful restructuring -- restructuring driven by changing patterns of trade, massive competition and the development and deployment of new technology: computers, the Internet, and global communications.

No business, or country, Bermuda included, is immune from the pressures of competition. In our business, banking, we have seen a pattern of mergers and acquisitions resulting in closures and layoffs quite similar to that seen in other industries. The Chase Bank of New York merged with Chemical Bank and is engaged in a restructuring that will reduce employment by many thousands.

Citibank and the like are doing the same. And so are we.

At the Bank of Butterfield, our restructuring began at the top. We will be proposing a substantial downsizing in our corporate board of directors in order to sharpen our international position. At the same time, we will create a special board to ensure an appropriate focus on our resident market. At other levels, implementing new technologies has and will continue to have an effect on employment. Today we have 40 percent less tellers as a result of the introduction of credit cards, ATMs, EDI and home banking services. It was not all that long ago when customers could only do their banking five days a week between the hours of 9.30 a.m. and 3 p.m. Today customers are able to access their banking accounts twenty-fours hours a day, seven days a week, 365 days a year through one or more of the above vehicles.

And this pattern is occurring elsewhere. In my own Company we had 28 cashiers some years ago. Today we have none. At the Telephone Company, we saw the elimination of fourteen middle level managers, as the imperative is to become more productive, increase services and bring more to the customer, whilst at the same time providing a return to our shareholders.

These are examples of what has happened, and more importantly what is happening in business generally.

Even governments are restructuring. The competitive forces there are not other governments -- but an intense competition for resources to meet acknowledged government responsibilities. The economic importance of government spending is moving to the fore in the form of entitlements at all levels of society from welfare through social security to health insurance. This rapidly mounting stream of government expenditure forces choices. And, like business, government can also "find'' revenue through restructuring -- using technology to reduce layers of management and front-line workers.

Bermuda is part of the world economy.

We have seen some government restructuring, and likely more to come. And our businesses are certainly undergoing the process.

One notable effect of government has been in the area of the Police. Reduction of redundant layers of management and redirection of limited resources has had a dramatic impact on crime for which the Commissioner, the Governor and the Government should be congratulated.

As to businesses, I've mentioned the Bank of Butterfield. In retail, we need fewer cashiers and book-keepers are practically superfluous. Technology has enabled us to do more with less. Some of you may remember how important it is to be absolutely attuned to inventory in the retail industry. So you used to have a stable of book-keepers keep track of it. Now, every time a sale rings up, a computer automatically reduces the inventory, and automatically signals when a reorder is necessary. And so the middle-level control function -- the book-keeper -- is not needed.

Unlike many global companies, we have been fortunate. We were able to minimise the human impact of our restructuring through attrition and retraining. But there is no doubt that those specific jobs are gone for good and those kinds of jobs will continue to disappear.

Even as the jobs disappear, the people do not. And, this, as citizens, should concern us deeply.

The winds of change are blowing, the economy of the past is disappearing, and we Bermudians need to adapt and prepare for those winds much better than we do now.

There is great debate in Britain and the United States over how best to prepare for these winds of change. Some of their debate is of interest. What's certain in Bermuda is that we need to adjust our thinking and emphasise the closest cooperation among government, the financial sector, and international business.

The questions to be asked are: whether our education system is preparing our people for jobs in growth areas, and whether our business training and government policies are appropriate to assist good workers re-enter the workforce once they have been affected by these economic trends.

Over the course of our history, we Bermudians have learned to avoid the damage of hurricanes through preparation. We have a building code to prevent the worst effects. Education is the building code for the economic hurricane that is shaking the world economy.

Are we endowing young Bermudians with the skills to fully seize the opportunities of this new age? or, Are we still providing courses and training for an economy that has been greatly affected by the winds of change? Let met tell you a story that is not about Bermuda to make my point.

Pittsburgh, the great steel capital of the world for three quarters of a century, produces very little steel anymore and retains few of the jobs on the mill floor or the mid-level white collar jobs in the headquarters, and generates little in the sectors like construction that used to arise. For years, government programmes in Pittsburgh continued to train displaced workers in construction trades, foundry skills and basic office skills. Yet, there were no jobs. So, these resources were wasted. And, hopes of the people were dashed.

Then one day, someone asked "why''. And something interesting happened. They looked at the employment picture in the Pittsburgh region. And they began to focus their resources on training people for job growth areas... like nursing and health care, like specialty metals and metallurgy, and because the Heinz food factories are there, as chefs and food preparers, and because USAir is based there, as computer ticketing agents.

The end result is that people are getting jobs, and employers can rely on the local labour pool to meet their needs better than they could before the reorientation of resources took place.

In Bermuda, over the last five years, we have lost six percent of the jobs in retail, 15% of the jobs in construction and seen stagnation in other sectors.

There is a real possibility that Bermuda could well be confronted with visible unemployment -- unless we take action.

The bright spot is in banks, insurance and international business where we've added between 10 percent and 15 percent more jobs. These are jobs arising from our comparative advantage in overseas financial management, insurance and reinsurance, and the administration of funds. But, as I have detailed, those jobs are not the same as they were five years ago.

And, in our case, as in Pittsburgh's, it is not enough to educate and train people, we must ensure that we educate and train them for the opportunities that are available.

Twenty years ago we were largely self-sufficient in such trades as electrical, motor and air conditioning, for example. Today scores and scores of qualified people have had to be brought into Bermuda as we are turning out all too few qualified people in the technical sector -- and these are jobs starting at $30,000 per annum.

In the months ahead, government will be embarking on education reform. We already do much. But are we doing it right? Are we emphasising the correct skills? Are we offering the right courses? Are we allocating our resources in the correct way? Are we in business and government working cooperatively enough to maximise opportunities for all Bermudians? These, I submit, are the difficult questions before us. The answers are these questions will provide the building code that will better prepare Bermudians to weather the winds of global economic change.

In finding answers we will then provide the basis for a resumption in economic growth which will mean growing revenues again after five years of stagnation.

Having enjoyed 40 years of growth in our incomes, the past five years have proved frustrating to us all.

In the last analysis final responsibility rests with the individual.

Solutions, I have no doubt can be found. But Bermudians in the 40 years after the war became spoiled to a degree while enjoying almost uninterrupted growth in Tourism and International business which were automatically reflected in continuing improvement in the standard of living -- decade after decade.

Every Bermudian has become increasingly frustrated while the economy stagnated in the `90s which is why I have now attempted to identify the problem as it exists today. To succeed, therefore, it will not only require the full support of government and the private sector but the individual must make a vital contribution.

And Bermudians must first show appreciation of the fact that Tourism is critical to our success, indeed survival. The warm friendly welcome which was our trademark for decades has significantly diminished and islands to the south such as Cayman and particularly the Bahamas are now way ahead of us.

The case of the Bahamas is illustrative. We all remember the terrible mistakes made there not so long ago and the dramatic impact those mistakes had on the economy and on the welfare of the people there. An insensitive government brought about unemployment exceeding 20 percent.

Here, in the next few years, there is a strong potential for unemployment resulting from business failures, but, more importantly, from restructuring of business in several areas. By taking the appropriate steps in education and training this need not happen and should not be allowed to happen. We are fortunate to have a Government which has an understanding of economics and the skills to find the right solutions.

As with the technical trades jobs, opportunities for Bermudians exist and there are other major growth opportunities in the international and financial sectors.

In the international sector, each individual must make every effort to equip himself with the appropriate education and training which happily is available to a great extent at the Bermuda College and give full support to whatever new programmes that Government devises.

In this effort, I am confident Bermuda will succeed in preparing for the winds of change and in building the good society of which Professor Galbraith speaks, "where the economic system works well and for everyone'' and where "opportunity matches aspiration, either great or small''.

WINDS OF CHANGE -- Sir David Gibbons `Here in the next few years, there is a strong potential for unemployment resulting from business failures, but, more importantly, from restructuring of business in several areas. By taking the appropriate steps in education and training, this need not happened and should not be allowed to happen.' ECONOMY ECO BUSINESS BUC