Last year, I did a post discussing the US ability to attract global talent to our high tech industries. In April, I did a post discussing how immigration might have contributed to the US having a per capita GDP that is somewhat higher than in other developed economies.  Recently, I came across a few more articles that relate to the issue of US exceptionalism—in this case regarding stock market wealth.

While US per capita GDP is modestly higher than in Europe, Canada and Japan, our stock market capitalization is far in excess of our population, or even our GDP.  Here is AI Overview:

As of June 2024, the US stock market represented 61% of the world’s stock market capitalization, which is its highest level since the 1960s. This is a significant increase over the past decade and a half, and is especially notable considering that the US only accounts for about a quarter of the world’s GDP. The US stock market is also roughly 10 times larger than its closest competitor, Japan. 

Not surprisingly, the same source suggests that high tech is the cause of this lopsided distribution of global stock market wealth:
However, some say that this level of concentration can imply an unbalanced economy. For example, the concentration of the US stock market itself is also notable, with just three companies—Apple, Microsoft, and Nvidia—accounting for 10% of the market value of global stocks.
When I was younger, I enjoyed reading Thomas Sowell’s books on the relationship between ethnicity and economic success.  Fans of his work might wish to check out two recent Substack posts by Razib Khan, who combines a deep understanding of genetics with extensive knowledge of global history. In the first post, he notes the unusual success of Indian-Americans, even when compared to other successful immigrant groups like the Chinese:

Of the 18 Asian Americans in the House of Representatives, five are Indian American. A decade ago, only a single member of Congress was Indian American. The presumptive Democratic nominee for President of the US in 2024, Kamala Devi Harris, has an Indian mother, while the Republican Vice-Presidential candidate J. D. Vance is married to an Indian American, Usha (née Chilukuri) Vance. Last fall, two Indian Americans, Nimrata Nikki Haley (née Randhawa) and Vivek Ramaswamy, were both prominently vying for the Republican Presidential nomination . . .

This is in contrast to other Asian American groups, like Chinese Americans, the most numerous subgroup in America (5.2 million vs 4.9 million Indian Americans). A difference in representation at the executive level has been noted in domains like the technology sector; considerably more people of Indian origin than Chinese rise above technical to high-level managerial positions.

In the second post, Kahn points to the fact that Indian migrants come disproportionately from relatively successful groups within the Indian population:

In India itself, 28% of Hindus are “General Category,” meaning they do not qualify for any affirmative action, unlike Dalits (“untouchables”), indigenous tribes or adivasis and “Other Backward Classes” (OBCs). A survey of Indian-American Hindus reports that here they are instead 83% General Category, 16% OBCs (vs. 35% of Indian Hindus) and 1% Dalits or of adivasi origin (vs. 35% of Indian Hindus). Private surveys have shown that 25% of Indian Americans are Brahmin, in contrast to 5%, at most, of Indians.

But caste tells only a part of the story.  The most notable aspect of Indian migrants is the relatively high educational level, which correlates with (but does not fully explain) their unusually high incomes earned in the US:

Nearly 80% of Indian immigrants in America over the age of 25 have a bachelor’s degree. This compares to 33% in the general American population. They contribute higher labor force participation than the overall population, 72% vs. 67%. More than 75% of Indian immigrants work in management, business and science (as opposed to 41% of the general population). No surprise either then, that Indian-immigrant median household income is considerably higher than that of Americans overall, ($132,000 vs. $66,000 in 2019).

Note that $132,000 is above even the median income of college grads. 

Here it might be useful to consider three ethnic groups, Chinese-Americans, Indian-Americans, and Jewish-Americans, each numbering roughly 5 or 6 million.   Both Chinese and Indian migrants come from a country with slightly over 1.4 billion people, and each group tends to have above average education.  That makes Jewish-Americans seem like the outlier.  But Kahn makes a persuasive case that at least in some respects (not all) Jewish-Americans are the closest comparison to the Indian migrant experience.

For instance, India has a complex set of ethnicities, many of which have been genetically and/or culturally isolated for long periods.  Kahn points out that while intermarriage is now fairly common for both Jewish and Indian-Americans, these groups were more isolated during much of their previous history.  

Of course, many populations have low rates of marriage outside their ethnic groups. But what makes Jewish people and high caste Indians different is that for centuries they largely avoided intermarriage despite living within other much larger societies.  Consider that the global Jewish population is roughly 15 million, whereas the entire Western world (broadly defined to include Europe, the Americas and Australia) has a population of 1.82 billion.  Similarly, the Brahmin comprise only about 5% of India’s 1.44 billion people.  In contrast, the China’s most successful group (the Han) comprise more than 90% of its population.

Today, nearly 40% of the world’s Jewish people live in America.  The figure rises to roughly 50% if you consider only Ashkenazi Jews, the most successful portion of the Jewish population.  Based on the evidence provided in Kahn’s posts, you could argue that the huge 1980-2020 wave of Indian migration to the US has had an economic impact equivalent to doubling our Jewish population.  In other words, we’ve added millions of people that are among the most educated and productive individuals in their ancestral home country.

Now let’s think about the fact that US corporations comprise 61% of global stock market wealth, a figure that has grown dramatically in recent decades.  Obviously there are many factors that led to this outcome.  But one important factor may have been the ability of the US to attract a disproportionate share of the global talent pool that is good at:

1.  Creating innovative new products.

2.  Having the financial and managerial skill to turn those products into successful businesses.

The 1880-1920 wave of Jewish migrants showed an ability to achieve those two goals to a degree well beyond their 2% share of the US population.  The recent wave of Indian migrants is showing similar success. 

This is not to suggest that these are the only two groups that matter for stock market wealth.  Nvidia founder is from Taiwan and Tesla’s founder is from South Africa.  Rather, I am suggesting that America’s ability to attract disproportionately large numbers of Jewish and high caste Indian migrants is emblematic of its broader appeal to talented people from all over the world.  To summarize:

America’s modest advantage over other developed countries in GDP/person is a function of our modestly more productive workers, on average.

America’s huge advantage over all other countries in market capitalization is a function of our vastly disproportionate number of extremely talented people, perhaps combined with the network effects of being able to work together.

It’s difficult to see how the US could ever bring its level of wealth inequality down to European, Canadian or Japanese levels without expelling a big share of our most talented people.