Peter Howitt, a professor at Brown University and the 2022 Nobel laureate in economics, stated that the spread of artificial intelligence (AI) will fundamentally transform not only industries but also education, social safety nets, and financial systems. He emphasized that South Korea must undertake a comprehensive redesign of its economic system in response to these changes.
The Korea Development Institute (KDI) and the Economic and Social Research Council held a conference on May 15 at the Westin Chosun Hotel in Seoul, titled "Economic Paradigm Shift for Reversing Growth Trends." Howitt delivered a keynote address on innovative growth strategies for the South Korean economy in the AI era.
Howitt diagnosed that the South Korean economy faces complex challenges, including the rise of AI, the spread of protectionism, demographic changes, and the need to shift from follower growth to leading growth.
He defined AI as a "General Purpose Technology" akin to electricity, electric vehicles, and personal computers, indicating that it is a technology that can transform the economic structure itself rather than being confined to specific industries.
"General Purpose Technologies tend to go through initial disruption and long adjustment periods before their productivity-enhancing effects spread across industries," Howitt said. He stressed that all countries need to actively embrace these technologies to reap future benefits.
He emphasized the necessity for a comprehensive institutional redesign that encompasses the education system, social safety nets, and the stability of financial systems to respond to the spread of AI. He also highlighted the importance of collaborative industrial policies among government, businesses, and academia.
Howitt underscored the need to maintain an open economic system despite the rise of protectionism. He stated, "International trade enhances competitive pressure and provides access to global markets and learning opportunities, which fosters innovation. We must seek new trade alliances while also strengthening domestic foundations in anticipation of declining demand from existing trading partners."
Regarding the issue of population decline, he cautioned against excessive pessimism. He noted, "Population decline is not necessarily a constraint on growth, as some may fear," but he advocated for selective immigration policies aimed at attracting talented individuals with innovative capabilities.
Howitt proposed establishing a "leading growth system" as a key objective for South Korea's economic strategy. He stated, "For the South Korean economy to transition to leading growth, a more innovative corporate ecosystem is essential," emphasizing the need for enhanced support for small and medium-sized enterprises, expanded antitrust policies, and the establishment of a technology-friendly financial system.
Concerns about the structural slowdown in the South Korean economy were prominently raised during the conference. KDI President Kim Se-jik remarked, "It is time for a new growth strategy focused on 'real growth' rather than short-term economic responses," in light of the economy experiencing a decline in growth rates by one percentage point every five years over the past three decades.
Deputy Prime Minister and Minister of Economy and Finance Koo Yun-cheol, in his congratulatory remarks, stated, "To address external uncertainties such as the Middle East conflict and the structural issue of declining potential growth rates, we need to move away from a follower economy and embrace innovation based on 'creative destruction.'"
* This article has been translated by AI.
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