The global economy is undergoing a historic structural transformation. According to new analysis from the Swiss Re Institute, three mega-forces are shaping a new long-term economic regime:
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Ageing populations
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Artificial intelligence–driven investment
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The revival of strategic industrial policy
These forces are not temporary economic trends or business-cycle fluctuations. Instead, they represent deep structural shifts that will reshape global GDP, labor markets, government spending, corporate strategy, and geopolitical relationships for decades.
This transformation aligns with the core narrative of The Great Global Tension the broad global reality in which economic, demographic, technological, and geopolitical pressures coexist, intersect, and intensify one another. The world is entering a period marked by slower baseline growth, higher structural inflation, demographic imbalances, AI-driven productivity shocks, and state-led economic competition.
1. Ageing Populations: The Demographic Shift That Slows Economies
One of the most powerful yet often underestimated forces shaping the global economic future is demographic ageing. Many advanced economies, along with several emerging markets, are experiencing a rapid shift toward older populations. Fertility rates have fallen far below replacement levels in countries such as Japan, China, South Korea, Germany, and Italy. Even countries with relatively strong demographic profiles, such as the United States, are experiencing long-term ageing trends.
The implications are enormous:
Lower Labor Supply
As populations age, the proportion of working-age adults declines. With fewer people entering the workforce, labor shortages become more common and wages increase due to scarcity. This can sound positive, but over time it leads to:
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reduced productivity
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higher business costs
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slower economic expansion
A shrinking workforce is a structural constraint on growth.
Higher Fiscal Burdens
Governments face growing pressure to finance:
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public pensions
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healthcare systems
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elderly care infrastructure
Older populations require more medical support and social assistance, which increases national debt and strains public budgets. This creates long-term fiscal challenges, especially for countries already struggling with debt.
Lower Consumption and Slower Demand
Younger populations tend to spend more on homes, vehicles, education, travel, and technology. Older populations are more conservative in spending. As a result:
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consumption slows
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demand for innovation decreases
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economic dynamism weakens
Ageing ultimately reduces a nation’s ability to maintain strong, vibrant economic cycles.
The Demographic Paradox
While technology and AI may improve productivity, demographic ageing works in the opposite direction, slowing growth. The future will be defined by the tension between these opposing forces.
2. Artificial Intelligence Investment: A New Engine of Growth and Inequality
Artificial intelligence is not just another technological advancement. It represents a foundational shift in production, data usage, labor allocation, and capital formation. AI is creating a new “super-cycle” of investment, with companies heavily allocating resources to strengthen computational infrastructure.
AI as a National and Corporate Priority
Governments and corporations see AI as a source of power:
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competitive manufacturing
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predictive analytics
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automation efficiency
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medical breakthroughs
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advanced robotics
This accelerated AI investment is shaping everything from national security to corporate value.
The AI Productivity Revolution
AI has the capacity to boost productivity through:
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automated workflows
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optimized logistics
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faster research cycles
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intelligent robotics
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enhanced decision-making
Economies able to integrate AI effectively will see higher growth potential.
But AI Also Creates Structural Challenges
Despite its advantages, AI also introduces risks:
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Employment displacement: repetitive jobs become automated
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Capital concentration: a few tech companies dominate the AI landscape
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Valuation bubbles: markets may overprice future AI profits
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Digital inequality: nations lacking data or computing power fall behind
AI will widen the gap between economies that adopt it and those that cannot.
The Race for AI Dominance
The U.S., China, and the EU are in an intense competition to lead the AI era. This rivalry feeds directly into geopolitical tension a core component of The Great Global Tension.
3. Industrial Policy Revival: The End of Pure Globalization
Industrial policy once considered outdated is back at the center of global economic strategy. Countries are now using powerful tools to secure domestic industries and reduce dependence on foreign supply chains.
Why Industrial Policy is Rising Again
The pandemic, geopolitical rivalry, and energy insecurity exposed the risks of long supply chains. Nations realized that efficiency cannot come at the cost of resilience. As a result, industrial policy is being used to:
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create national champions
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localize critical manufacturing
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support strategic sectors
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control high-tech production
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secure energy independence
The Return of State-Led Strategy
From the U.S. CHIPS Act to China’s Made in China 2025 initiative, governments are reshaping global manufacturing through subsidies, tariffs, and strategic investment.
This revival changes the global economic landscape:
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trade flows become more regional
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supply chains grow shorter
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economies become less interdependent
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competition becomes more political
The old global order is being rewritten.
4. How These Three Forces Interact to Reshape Global Growth
Each of the three mega-forces ageing, AI, and industrial policy is powerful individually. But their interaction is what makes this shift historic.
Ageing weakens labor supply → AI replaces labor shortages
Older economies need productivity gains. AI provides them.
AI requires massive capital investment → governments fund industrial policy
Industrial strategies support the AI race.
Industrial fragmentation → raises costs and keeps inflation higher
Shorter supply chains are more expensive.
Ageing increases public debt → industrial policy increases government spending
Fiscal pressure intensifies.
AI productivity increases → but inequality and geopolitical tension grow
Nations with strong technology win; others fall behind.
This web of interactions defines the new economic reality.
Global Takeaways (20% Points Format)
Most Impacted Economies
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High risk: Japan, Italy, South Korea, China
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Moderate risk: U.S., U.K., Germany
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High opportunity: India, Indonesia, Vietnam, Mexico
FAQs
1. Why are ageing populations such a major economic risk?
They reduce workforce size, slow demand, and raise government spending dramatically.
2. Will AI fully offset the economic impact of ageing?
AI helps productivity but cannot replace declining populations entirely.
3. Why is industrial policy returning now?
Because globalization exposed vulnerabilities in supply chains and national security.
4. Which countries will do best in the new era?
Those with young populations and strong industrial planning, such as India and Vietnam.
5. How does this relate to The Great Global Tension?
These shifts intensify geopolitical rivalry, economic inequality, and global fragmentation.