Nobel Laureate's Warning: "Creative Destruction Is the Solution to Korea's Low Growth"

Professor Peter Howitt Delivers Speech at KDI Conference on May 15

Establishing an Innovative Corporate Ecosystem for Leadership-Driven Growth

Koo Yoon-cheol: "Korea Must Move Beyond the Catch-up Economy"

"The Korean economy faces a complex set of challenges, including artificial intelligence (AI), the spread of protectionism, demographic changes, and the transition from catch-up growth to a leadership-driven growth model. For Korea’s economy to shift to a leadership-driven growth model, a more innovative corporate ecosystem must be established."

On May 15, Peter Howitt, recipient of the 2025 Nobel Prize in Economics, laid out the direction for Korean policy based on Joseph Schumpeter's theory of creative destruction. Creative destruction, a concept introduced by Austrian economist Joseph Schumpeter in 1942, posits that technological innovation is the driving force of economic growth and that new innovations disrupt existing paradigms.

President Lee Jae-myung is shaking hands with Peter Howitt, Nobel Laureate in Economics and Professor Emeritus at Brown University, USA, on the 15th at the Blue House before their meeting. Photo by Blue House Press Photographers Group

Professor Howitt delivered the keynote address at a conference jointly hosted by the Korea Development Institute (KDI) and the National Research Council for Economics, Humanities and Social Sciences, under the theme "Economic Paradigm Shift for Reversing Growth Trends."

Professor Howitt said, "Because AI is a general-purpose technology capable of altering economic structures, it is necessary to redesign education systems, social safety nets, and the entire financial system." He suggested that maintaining an open trade regime, attracting innovative talent from abroad, fostering small and medium-sized enterprises, and strengthening antitrust policies are essential to establish the foundation for leadership-driven growth.

He added, "General-purpose technologies tend to cause initial disruption and require a lengthy adjustment process, but their productivity gains eventually spread across all industries. To achieve future success, every country must actively embrace these technologies."

He also noted that the spread of AI will have far-reaching impacts on education systems, social safety nets, and the stability of the financial system, emphasizing the need for industrial policy based on cooperation among government, businesses, and academia.

Regarding Korea's declining population, Professor Howitt commented, "Demographic decline may not be as significant a constraint on growth as feared, but expanding selective immigration policies to attract talented individuals with innovative capabilities from overseas is a desirable direction."

The event brought together experts from academia, government, and industry to discuss the structural challenges facing the Korean economy amid rapidly changing circumstances, and to explore strategies for innovation-driven growth to reverse the decline in the growth trend—which has fallen by one percentage point every five years over the past 30 years.

In his opening remarks, Lee Han-joo, Chairperson of the National Research Council for Economics, Humanities and Social Sciences, emphasized, "As the Korean economy faces the limits of the traditional catch-up growth model, it is now time to seek a new growth path based on creativity and innovation." He continued, "In the midst of a technological revolution driven by AI and robotics, I hope today's conference will serve as a meaningful starting point for academia, government, and industry to jointly discuss innovation-driven growth strategies for the Korean economy."

Kim Sae-jik, President of KDI, also assessed, "The Korean economy is facing structural challenges such as a long-term decline in growth rates and the risk of zero growth. It is time to move beyond short-term economic management and develop new growth strategies for 'genuine growth.' Innovative ideas and policy initiatives that go beyond conventional wisdom must become the new engine of growth for the Korean economy."

In a congratulatory address, Deputy Prime Minister and Minister of Economy and Finance Koo Yoon-cheol stressed, "To cope with external uncertainties such as the Middle East conflict and structural issues such as the decline in potential growth rates, it is necessary to move away from the traditional catch-up economy and pursue an innovative transformation based on 'creative destruction.'" He added, "The government will continue policy efforts to build new growth foundations for the Korean economy by realizing a super-innovative economy to become one of the top three AI powers, strengthening economic security, advancing a green transition, and instituting systemic innovation across society."

This content was produced with the assistance of AI translation services.