Demographics, technology and globalisation: the economic tug-of-war

Exploring the long-term nature of massive shifts in technology, demographics and globalisation can help us better understand how such forces may shape future markets, individuals and the investing landscape in the years ahead. 

The top three strategic priorities highlighted by C-Suite executives are interconnected. Technology, international expansion (or globalisation) and the need for a talent strategy are a trio of strategic decisions that need to be addressed together to drive long-term success. These decisions cannot be addressed in isolation.

 Vanguard’s proprietary Megatrends model supports the C-suite barometer’s latest findings. The model brings these three priorities together into a single coherent framework and highlights how the economic outlook in the decade ahead will be determined by a tug-of-war between technology and demographics. 

Our baseline, and the most likely outcome, is an optimistic scenario – one in which transformation of technology is such a success that it dominates and drives growth higher than what we have seen in the decade just gone. The flipside of this is a pessimistic scenario in which technological advancements are not large enough to offset the drag from an ageing population. Although an unlikely probability, the third scenario is one in which the decade ahead looks exactly like the past decade. 

The big decisions and strategies that C-suite executives set now will directly impact the outcome when it comes to technology. However, there is not a direct mapping from an ageing population to a talent strategy. Designing a successful talent strategy – finding the right people at the right level – is probably getting harder, partly because we live in a world where the size of the working population is shrinking. 

International expansion (or globalising one’s business) can help here, because when you look at emerging economies of, for example, Latin America, Africa and India, they offer huge potential given their young populations. 

The UK economy is an interesting one. For a decade, the UK has experienced lower growth than the US – arguably a potential issue, as it reduces the country’s appeal to overseas investors looking to expand. Despite these challenges, the UK is still considered one of the top targets for company expansion, thanks to its strong legal and professional services sector, the UK time zone and the widespread use of the English language and relative stability. 

As economists, we have a good understanding of the drivers of economic growth and productivity: it is the quality of our people, our capital and how they are combined with technology and innovation. That brings us full circle to needing the right people in the right markets with access to the right technology. These are critical to improve a company’s competitiveness. The challenge for corporate leaders is being able to design the mix of strategies that enable them to win the tug of war.

Jumana Saleheen, PhD, is Head of Investment Strategy Group for Europe, and Chief European Economist at Vanguard – one of the world’s most respected investment management companies. Her areas of expertise include monetary policy, international macroeconomics, and macroeconomics forecasting. Before joining Vanguard in 2022, Jumana has held several senior roles at the Bank of England, where most of her career was in the Monetary Stability Directorate and later as head of division in the Financial Stability Directorate