THE END OF AMERICAN FINANCIAL EXCEPTIONALISM

As the dollar cycle reverses and Asia's rise continues, Indian growth will accelerate

- HARSH GUPTA MADHUSUDAN

AMERICA LOOMS LARGE on the financial world. While in the realm of geopolitics and even geoeco- nomics, there is much talk about multipolarity-that is not the case for capital markets. America has half of the world's market capitali- sation, even as it has a quarter of world GDP (and a sixth of world GDP when adjusted for cost of liv- ing.) All this for a population that is around 4% of the world.

India on the other hand has more than a sixth of global popula- tion, and only about 4% of the market cap. China with a similar population share and a much big- ger economy, does only somewhat better even if one includes Hong Kong and takes out the redundan- cies. Europe is stagnating for now, and Japan is at best a value inves- tor's playground, not a growth one.

Much of this exceptional Amer- ican success can be attributed to it being a largely welcoming society with its now-famous melting pot, a great secure geography with massive natural resources, a mature if turbulent democracy and a system that broadly respects hard work and merit. Yet time and scale have been the real secrets of America.

Growth, peace, and the magic of compounding for generations allowed America to take the crown from its Anglo cousins in England and see off competitors from Russia to Germany to Japan.

But just like America today has almost as many people as Russia, Germany and Japan combined, both India and China have more than four times the number of people as America. Both India and China got modern administrative states with relative domestic peace less than eight decades ago. By then, America already had eight decades of growth after its Civil War starting off an already high per capita base.