[Editorial] Nobel laureates’ lessons

Korea must pay attention to innovation and 'creative destruction' to reinvigorate growth

The 2025 Nobel Memorial Prize in Economic Sciences went to three economists — Joel Mokyr at Northwestern University, Philippe Aghion at College de France and Peter Howitt at Brown University.

They were honored as the prize recipients for their work on how innovation and the forces of "creative destruction" can drive economic growth.

Their study was significant in that it has awakened people to the importance of innovation in the age of the "fourth industrial revolution," characterized by advanced information technologies such as artificial intelligence.

By and large, they award high marks to the Korean economy.

To Mokyr's eyes, South Korea is an unprecedented success case of rapid industrialization, and the key to its success lies in innovation. He said South Korea has miraculously pulled itself up from postwar poverty in the 1950s to become one of the world's richest economies, standing as a model for how technological innovation can drive sustained growth.

Indeed, South Korea grew rapidly enough to be a benchmark for other developing countries. However, notwithstanding his high praise, the Korean economy faces a number of problems.

The times of high growth are over. It is stuck in a low-growth rut. The Korean economy is forecast to grow 0.9 percent this year and 1.6 percent next year, according to the Bank of Korea.

Its labor force is shrinking quickly due to decades of low birth rates, and its population has become superaged, with people in their 70s and above outnumbering those in their 20s.

The Korean economy is especially vulnerable to external influences, including a tariff war. The stalemate of negotiations over Korea's investment in the US adds to uncertainties. Domestic consumption and employment, particularly youth employment, are stagnant. The country's export-dependent growth model wobbles on the rising tide of trade protectionism.

The Nobel Prize recipients' message on technological innovation and creative destruction evokes strong sympathy.

South Korea did wonders with rapid growth on the foundations of liberal democracy and market economy, the two pillars that made innovation possible. However, if its growth fizzles out while other economies keep developing, the "Miracle on the Han River" will only be remembered as a past glory.

The country must do its utmost to clear obstacles to innovation. Technological innovation and creative destruction can breathe life into the Korean economy.

But the reality is far from that path.

The government vows reform and growth, but political logic trumps economic reasoning. Populism is rampant. Barriers to protect vested interests remain high, and bureaucratic society falls easily into inertia. Militant trade unions strongly resist changes to defend their rights. The Lee Jae Myung government is biased toward labor.

Anti-corporate policies are concerning. Among them are the "Yellow Envelope" bill, which expands labor rights broadly while scaling back employer rights, and the Serious Accident Punishment Act that imposes criminal liability against business owners or executives as well as punitive damages for accidents.

As the end of the Tada van-hailing app shows, new industries could lose an opportunity to grow, walled up by regulations and interest groups. The new service was suspended as lawmakers enacted a law to ban it, siding with taxi drivers who opposed it. In the times of a shrinking labor force due to low birth rates, systems that block competition and creativity will instantly shackle growth.

The truth told by the Nobel economics laureates is simple: If innovation stops, so will growth.

The way to get South Korea out of a low-growth rut is to foster innovation, not a populist and wasteful experiment such as distributing "consumption coupons" to everyone in the name of economic recovery. Now is the time to practice the lesson of the 2025 Nobel economics prize winners.