The Economy of the Bahamas

Both pirates and tourists have contributed to the economy of the Bahamas over the years

Photo credit: © Pattie Steib |

The Bahamas' Economy

The economy of the Bahamas has historically relied heavily on its location and geography. Its complex network of islands and its position close to the United States made it ideal for pirates and smugglers during the islands' formative years. North American tourists are now also reaping the benefits of the location of the islands.

The History

The first cultures to settle in the Bahamas, the indigenous Lucayans followed by the Puritan Eleutheran Adventurers, had to rely on their own farming and craft skills for sustenance and survival. In the late 1600s and early 1700s when pirates and privateers saturated the waters around the Bahamas, ships captained by legendary figures such as Blackbeard, Calico Jack, and Sir Henry Morgan stole gold, silver, and goods from merchant ships in the region. Blackbeard alone was said to have marauded 40 ships.


Loyalists who fled the continental United States for the Bahamas during the Revolutionary War brought both farming and shipbuilding to the islands of the Bahamas. Although Royal Governor Woodes Rogers had contained the problem of piracy by 1720, the American Civil War and later the Prohibition era saw smuggling become a major economic boon for Nassau and the Bahamas. Smugglers from the Bahamas would sneak past Union blockades to transport Confederacy cotton from Charleston to the Bahamas. Once there, the cotton would be traded in exchange for goods to the British, whose textile industry relied on cotton. This practice continued during Prohibition with the smuggling of scotch whiskey through Nassau. Although the sponge-harvesting business faltered shortly after the end of Prohibition in 1934, World War II brought bases and jobs to the islands. Nevertheless, it would not be until 1961 that the economy of the Bahamas would again begin to take off.

The Past 50 Years

The economy of the Bahamas saw significant benefits when American tourists were prohibited from visiting Cuba in 1961. No longer able to take the short trip to Cuba, vacationers could now hop a short flight from Miami to reach one of the islands of the Bahamas. Cruise ship facilities in Nassau were improved, and hotels and other tourist facilities were steadily built up and modernized. Currently, tourism provides 50 to 60 percent of the nation's total GDP, and tourism-related jobs employ roughly 50 percent of the workforce in the country. The financial sector of the Bahamas is also strong, accounting for 15 percent of the nation's GDP. Primary exports include pharmaceuticals, rum, and refined petroleum products. The Bahamian dollar is equivalent to the United States dollar, and the economy of the Bahamas typically follows patterns of the United States' economy.

Like many of the Caribbean nations, tourism provides valuable jobs and income to the residents of the Bahamas. Self-sufficiency is important to Caribbean governments, however, and the Bahamas is encouraging e-commerce as a new form of economic growth.


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