Camille Van Vyve
04 Feb 2025
How the protestant legacy shaped American capitalism
Donald Trump's inauguration, marked by his famous slogan Make America Great Again, highlighted a strongly nationalist and ultra-capitalist vision of the United States. Behind this ambition lies a deep-rooted legacy: Protestant ethics, a culture of individualism, and unwavering confidence in financial markets. Does this heritage explain the United States' dominance in global financial markets?
Protestantism vs Catholicism
Protestantism is often credited with significantly influencing the development of modern capitalism. In the United States, a land shaped by Protestant immigration, this legacy has fostered values such as discipline, individual responsibility, and hard work—values that contrast sharply with the more cautious and collective approaches commonly observed in Europe. Understanding the fundamental differences between Protestantism and Catholicism helps shed light on American and European mindsets and explains why the United States dominates global markets.
Views on work and wealth
Catholic doctrine has traditionally associated wealth with the potential for moral corruption. There has historically been a certain distrust toward the accumulation of material goods, with a strong emphasis on charity and mutual aid. Conversely, in many Protestant traditions, work is seen as a divine calling. The accumulation of wealth, when achieved through honest labor, is considered a blessing from God and a sign of spiritual success.
Community vs individual
The Catholic Church plays a unifying role within communities, promoting values such as humility, submission, and solidarity. In Protestantism, the emphasis is on individualism and personal responsibility, encouraging self-reliance and the pursuit of personal success.
Risk culture and innovation
American individualism creates an environment where innovation and entrepreneurship thrive. Risk is seen more as an opportunity than a threat, and expanding into new markets is a necessity. This mindset has driven the United States to lead the global development of disruptive businesses and emerging industries such as technology, through a mix of public and private investments. In finance, this has resulted in the creation of new financial products such as options, derivatives, and index funds.
The financialization of the American economy
While many European countries remain attached to strong industrial sectors, the United States has embraced the financialization of its economy. New York, with Wall Street, has become the nerve center of global financial markets. American companies, whether in technology or manufacturing, rely heavily on access to capital and financial services. In contrast, European markets, although sophisticated, remain fragmented and less dynamic in terms of trading volumes and financial innovations.
The "American dream" and financial markets
The "American dream," often tied to a meritocratic ideology, fuels many Americans' interest in financial markets. Investing in stocks is seen as an accessible way to build wealth, even for the middle class. This broad participation contributes to market liquidity and dynamism. In Europe, skepticism toward financial markets is more pronounced. European households often favor safer investments, such as real estate or government bonds, reinforcing a more conservative and less speculative financial system.
Mutual trust between individuals and markets
Just as Americans place their trust in financial markets, the markets reciprocate. Investors believe in American companies' ability to generate significant cash flows in the future, as they have consistently demonstrated exceptional skill in innovating, capturing new markets, and maintaining high margins. These firms also benefit from a startup-friendly ecosystem, easy access to financing, and an expansion-driven mindset—all factors that contribute to high valuations.
The hidden cost: short-termism, inequality, and pressure
However, American market dominance comes at a price. In the U.S., the relentless pursuit of short-term profits has sometimes led to major crises, such as the 2008 subprime mortgage collapse. This contrasts with Europe’s more cautious approach, where central banks and regulators prioritize long-term stability. Similarly, the "American dream" often masks growing inequalities and intense workplace pressure. In Europe, stronger social protection systems help mitigate these disparities, albeit at the cost of slower economic growth.
Staying invested globally
Despite the current dominance of the U.S. stock market, it is crucial not to concentrate investments solely in this market. Economic cycles, geopolitical risks, and sometimes excessively high U.S. stock valuations highlight the importance of diversification. Just recently, the launch of China's DeepSeek artificial intelligence sent tremors through U.S. indices... Investing globally through ETFs allows access to opportunities in other regions with different and often complementary growth dynamics. With Easyvest, your portfolio is globally diversified, ensuring a highly robust and resilient investment strategy. Feel free to run a simulation and connect with one of our wealth managers.