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The Bretton Woods System was established in 1944; since then, the American economy has experienced tremendous growth in its finance and financial services sectors. The sectors have yielded high returns and have been used by the American government as a tool to influence allies and enemies alike. However, just as Amsterdam was once the center of world finance, then London, New York’s position is not guaranteed either.
For sophisticated institutional investors and risk managers, the important question is what could move the financial center of gravity, and how to see it coming. Of course, this has massive implications for one’s ability to raise and deploy capital.
Just as conflict yielded a shift in the economic center of gravity previously, the same is likely to occur in the future. The sections below consider how dependent the American economy has become on finance, how financial capitals have moved before, and where the next move could come from.
A growing share of the American economy depends on finance. Finance and insurance produced 2.8 percent of GDP in 1950, 4.9 percent in 1980, and roughly 8 percent today.
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The profit share tells a starker story: finance earned less than 10 percent of US corporate profits in 1947, climbed to a peak near 38 percent in 2002, and has since settled in the 20 to 30 percent range.
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A growing share of top graduates goes into the industry as well. Among Harvard men of the class of about 1970, 5 percent worked in finance; by the class of about 1990 it was 15 percent.⁴ In the Class of 2025, finance alone took 21 percent of seniors entering the workforce, the largest single destination, ahead of technology and consulting.⁵ The reason is pay: Harvard graduates in finance earned a 195 percent premium over classmates in other fields.⁶
By Jack Bogle’s reckoning, capital formation - fresh money directed to new businesses, new technology, and productive assets - was 0.8 percent of equity-market activity. The rest was the market pricing paper it already owned.
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The bad news is that finance is a mobile business. It scales up and down with almost no friction: a firm can manage $1 billion with nearly the same staff that manages $100 million, which is one reason the industry concentrates wealth, and the assets can leave as easily as they came. This was made perhaps most clear during the SVB collapse, during which deposits were pulled out at a rapid rate.
Although the American colonies led Great Britain in purchasing power per capita from 1700, possibly from 1650, they had essentially no financial industry relative to that present in England.⁸ The American colonies’ wealth rested primarily on agricultural production and resource extraction: tobacco, rice, and indigo in the South; timber, fish, furs, and shipping in the North. Wall Street became relevant more than a century after America established its economic relevance. The sequence repeats across every financial capital:
A similar story can be told more recently: in the 1990s, six of the ten largest companies in the world were Japanese banks, all now much less relevant than they were then.¹¹
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The cost of losing global leadership can be stark. Take, for example, the United Kingdom. Were the United Kingdom a state in the United States, it would have the lowest GDP per capita of any state.¹³
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Impact: Leading firms are typically replaced, and this trend is impacted greatly by geopolitical events. Oil concerns in the 1970s and Japan’s rise in the 1980s are great examples of this.
There is a comforting story that the international order runs on shared democratic values. However, recent news argues differently - on July 22 Washington signed a civil nuclear agreement with Saudi Arabia that commits the kingdom to US-built reactors and, per reporting, leaves a pathway toward domestic enrichment.¹⁴ Saudi Arabia is an absolute monarchy with roughly $2.6 trillion of listed market value.¹⁵ Mongolia - a democracy, but one wedged between two great powers with little capital and no leverage - receives no such offer. The difference between the two is money and strategic position.
The financial transition away from America is enabled partly because trade relationships have already shifted away. Again, here the concern for nations is not form of government but more economics and strategic position. In 2000, only 33 countries traded more with China than with the United States; today the count is 151, against 57 for the United States.¹⁶
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Chinese cross-border transactions now primarily occur in renminbi.¹⁷
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Despite these shifts in trade, America still has been the more attractive place to invest. Since the eve of the financial crisis, the S&P 500 has quintupled while Shanghai remains below its 2007 peak and Hong Kong is roughly flat - and Japan’s rally only reclaimed its 1989 high in 2024, thirty-five years later:
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Egan-Jones calculations from monthly closing prices for the S&P 500, Nikkei 225, FTSE 100, Hang Seng, and Shanghai Composite via Yahoo Finance, December 31, 2007 = 100, through the July 24, 2026 close; price-only indices in local currency.¹⁹
Of course, this is worthy of investigation given that China has seen such swift economic growth across a variety of measures, many of which it outranks the United States in, for example, purchase power parity, energy production, manufacturing capacity, and others. More time is required to explain the topic as a whole, though it is partially explained by the following:
Impact: A highly competitive Chinese market, mixed with deflation, and financial isolation can depress Chinese equity valuations while purchasing power parity for the population improves and real power grows.
As stated in “Play It Again; China’s Fast-Follower Playbook Reaches AI” (No. 203): the play that took China to dominance in shipbuilding, solar, batteries, and EVs is now working well in artificial intelligence.²⁰
Pearl Necklace. For China to fully realize its ambition however, it needs unchecked access to other markets. China’s access to the open Pacific is blocked by the first island chain - Japan, the Ryukyus, Taiwan, the Philippines, down to Borneo - a line conceived as containment by John Foster Dulles in 1951.²¹ Beijing might prefer to see that arc as a necklace of pearls around the central kingdom; however today it functions as something less welcome.²²
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Insufficient alternative. The Belt and Road Initiative is the continental alternative, and it is an inferior approach: corridors through unstable states, non-contiguous segments, and rail economics that cannot approach a container ship’s.²³
Taiwan’s centrality. Thus, the conflict over Taiwan is clear. It hosts TSMC - the most valuable company outside the United States, sixth in the world at roughly $2.2 trillion²⁴ - and it is the central link in the chain. That is why America cares so much about the island, and why the pattern below deserves attention: announced US Navy transits of the Taiwan Strait have fallen from a trailing-twelve-month peak of 16 in 2021 to 2 today.
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Washington, engaged in Iran and needing cooperation on global energy flows, is running a more passive approach to the Strait. The risk is that China sees an opportunity to upset the geographic status quo from which America currently benefits greatly. Particularly if China sees its advantage as dwindling, it may decide to act sooner rather than later. The same thought process certainly spurred the start of other conflicts.
Impact: If China becomes impatient on Taiwan, repricing will occur quickly as well.
America’s role in the world has shifted. To this end America is taking a less overtly aggressive stance on Taiwan:
These ideas, some of which come from John Mearsheimer, matter greatly because as economic power shifts so does financial power, and it has massive implications for raising and deploying capital.
None of this means America goes away. What to watch:
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Finance made Amsterdam, London, and New York rich after economics and militaries made them powerful, and in each case the financial industry proved highly profitable. The United States has rotated its best talent and much of the world’s equity value into a mobile industry. The world is changing rapidly. This installment aims to provide a framework of the possible shifts for the benefit of sophisticated institutional investors and risk managers.
1. Greenwood & Scharfstein, “The Growth of Finance,” Journal of Economic Perspectives 27:2 (2013): finance and insurance value added of 2.8% of GDP in 1950, 4.9% in 1980, and 7.7% in the mid-2000s. hbs.edu/ris
2. Federal Reserve / BEA, finance and insurance value added as a percentage of GDP, 8.0% (July 2025). tradingeconomics.com
3. US Bureau of Economic Analysis, National Income and Product Accounts: corporate profits with IVA, domestic industries total less nonfinancial, annual averages. Egan-Jones calculations. _Corrected: the prior citation (a Wikipedia page giving ~50% by 2010) measures a different base and contradicts this exhibit.
4. Goldin & Katz survey of 6,500 Harvard graduates (male graduates in finance rising from 5% to 15% between the classes of c. 1970 and c. 1990), reported in Harvard Magazine, “Flocking to Finance” (May-June 2008).
5. The Harvard Crimson senior surveys: Class of 2025 (finance 21%, the largest industry destination, ahead of technology at 18% and consulting at 14%); the finance share has held near 21% since the Class of 2021.
6. Bertrand, Goldin & Katz, “Dynamics of the Gender Gap for Young Professionals in the Financial and Corporate Sectors,” AEJ: Applied Economics (2010), fn. 1 (195% finance pay premium for Harvard graduates in 2005).
7. John C. Bogle, The Clash of the Cultures: Investment vs. Speculation (2012): annual stock trading of ~$33 trillion against capital formation of ~$250 billion (99.2% speculation, 0.8% capital formation).
8. Lindert & Williamson, “American Colonial Incomes, 1650-1774,” NBER Working Paper 19861.
9. The Dutch East India Company’s 1602 IPO and the Amsterdam market in its shares.
10. The transfer of Dutch financial technique to London after 1688 and the chartering of the Bank of England (1694) on the Amsterdam model.
11. The 1989 global market-capitalization table (Industrial Bank of Japan, Sumitomo, Fuji, Dai-Ichi Kangyo the four largest; six of the top ten Japanese). Motley Fool; CNBC.
12. Exhibit IV, 1980-2020 columns: GFM Asset Management, as circulated via Gavekal Data / Macrobond. 2026 column: companiesmarketcap.com, July 2026, excluding Berkshire Hathaway and Saudi Aramco.
13. Newsweek, reporting the Institute of Economic Affairs / IMF comparison of UK GDP per capita with all 50 US states (April 2026). _Corrected: UK GDP per capita is ~$52,600 (World Bank 2024: $52,637; IMF: $52,423), not ~$57,000.
14. The Washington Post, “U.S. signs nuclear deal with Saudi Arabia that gives it path to enriching fuel” (July 22, 2026); the Abraham Accords condition and the President’s statement that there will be no enrichment, CBS News.
15. Saudi Arabia’s listed market capitalization (~$2.6 trillion).
16. Country-by-country larger-trading-partner classification for 2000 and 2025, from IMF Direction of Trade Statistics, via Visual Capitalist (33 in 2000; 151 versus 57 in 2025). Basemap: Natural Earth.
17. The renminbi overtaking the dollar in China’s own cross-border transactions (48.4% versus 46.7%, March 2023) and leading both inbound and outbound flows in 2024: China’s State Administration of Foreign Exchange via Reuters/Nikkei and FXC Intelligence.
18. Exhibit VII: share of China’s cross-border transactions settled in renminbi versus US dollar, 2010-2022. Underlying data from China’s State Administration of Foreign Exchange, as compiled and charted by Bloomberg; recreated as an Egan-Jones chart from the published series.
19. Exhibit VIII: Egan-Jones calculations from monthly closing prices for the S&P 500, Nikkei 225, FTSE 100, Hang Seng, and Shanghai Composite, December 31, 2007 = 100, through the July 24, 2026 close; price-only indices in local currency. Corrected: the prior version baselined the three Asian indices to their January 2008 closes, which overstated the Nikkei and inverted the Hang Seng.
20. Egan-Jones Risk Commentary No. 203, “Play It Again; China’s Fast-Follower Playbook Reaches AI.”
21. The island chain strategy, conceived by John Foster Dulles in 1951, and the first chain (Japan, the Ryukyus, Taiwan, the Philippines, Borneo) with Taiwan as its central link. Exhibit IX map reproduced from The Economist.
22. James Kurth, Claude C. Smith Professor Emeritus of Political Science, Swarthmore College.
23. Sarah C. M. Paine, US Naval War College, on maritime versus continental powers and the economics of the Belt and Road.
24. TSMC market capitalization ~$2.2 trillion, sixth most valuable company globally and most valuable outside the US (July 2026). companiesmarketcap.com
25. Exhibit X: compiled from US 7th Fleet and Indo-Pacific Command announcements, the GMU Taiwan Security Monitor, and USNI News; Egan-Jones research, as of July 23, 2026.
26. Share of global payments by value, Swift (customer-initiated and institutional payments): US dollar 50.5%, euro 21.9%, renminbi 2.7% in December 2025 (Swift RMB Tracker, January 2026 edition). _Corrected: the prior 59.27% figure is Swift’s series excluding intra-eurozone payments and is not comparable with the all-payments figures cited alongside it.
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