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The War Economy or the AI Economy: Who Will Shape the New Global Economy?

By Prof. Khalid Wassef Al-Wazani

Professor of Economics and Public Policy

Mohammed Bin Rashid School of Government

The new global order is being propelled by two unconventional and contradictory forces. The first is driven by the drums of war and displays of power; the second by artificial intelligence and the technological revolution, or, more precisely, the Fifth Industrial Revolution, which has made big data the fuel of global digital transformation and the world economy. Today, the world revolves around these two forces. The interaction between them will shape the emerging global economy and determine countries’ ability to achieve their growth and development objectives in the decades ahead.

On the one hand, wars have brought back to the fore concepts the world once believed it had moved beyond: energy security, food security, the security of trade corridors, defence spending, supply chains, and economic protectionism. Governments are now allocating billions of dollars to strengthen their economic security, build strategic reserves, and reshore critical industries—even when doing so comes at the expense of economic efficiency and entails higher production costs.

On the other hand, the world is witnessing an unprecedented race to invest in artificial intelligence, semiconductors, cloud computing, data centers, and digital infrastructure. Competition is no longer simply about controlling natural resources; it is increasingly about owning algorithms and data, and possessing the capacity to produce knowledge and convert it into economic value. Estimates by the International Monetary Fund suggest that investment in AI has become one of the most important drivers of global growth, and that the resulting productivity gains could partly offset the slowdown caused by geopolitical tensions and trade restrictions.

Herein lies the paradox. While wars consume resources, intensify pressure on public finances, and raise debt and inflation, artificial intelligence creates new economic sectors, boosts productivity, reshapes labor markets, and accelerates innovation. Caught between an economy that consumes wealth and one that creates it, countries face strategic choices that will determine their standing in the new global economic order.

This challenge is not confined to the major economies. The Arab region now faces a historic opportunity to define its place in this transformation. Although the region possesses a strategic geographical location, significant energy resources, and substantial sovereign wealth funds, its future success will depend increasingly on its ability to invest in human capital, scientific research, digital infrastructure, and innovation—and to turn artificial intelligence into a driver of productivity and economic diversification rather than remain merely a consumer of technology. Perhaps the greatest danger facing Arab economies is that they become preoccupied with managing the repercussions of the war economy while neglecting investment in the economy of the future. The countries that lead the world in the decades ahead will not necessarily be those that spend the most on managing crises, but those that invest the most in knowledge, technology, and people.

Ultimately, the world no longer appears to operate within a single economy, but within two parallel ones: one imposed by wars and conflicts, which redistributes wealth, and another driven by artificial intelligence, which creates it anew. The question that should occupy policymakers today is not which of these two economies will prevail, but how countries can reduce the cost of the first and accelerate the benefits they derive from the second. The future will not be written on battlefields alone; it will also be written in innovation laboratories, data centers, universities, and the companies developing the technologies of tomorrow.

Prof. Khalid W. Al Wazani