Nobel Prize-winning economist Peter Howitt said South Korea is putting innovation-led economic growth into practice “so well,” pointing to its heavy research and development spending and the government’s support for startups and small and medium-sized enterprises.
President Lee Jae Myung met Howitt, a professor of economics and the Lyn Crost professor of Social Sciences at Brown University, as well as the Ph.D. adviser to Ha Joon-kyung, senior presidential secretary for economic growth, at Cheong Wa Dae on Friday, which marked Teachers’ Day in Korea.
Senior presidential spokesperson Kang Yu-jung explained, "The meeting was arranged to explore a faster and stronger strategy for a major economic leap forward following the Middle East war" prior to the second year of the Lee administration.
During the meeting, Lee and Howitt discussed “ways to enhance productivity through innovation, create a fair competitive environment that supports innovative capabilities, and embrace those who could be marginalized in the process of innovation,” Kang said in a press statement.
“We expect today’s discussions to make an important contribution not only to the economic growth strategy for the second half of the year, but also to the establishment of a mid- to long-term national future vision to be formulated in the future,” Kang added.
During the meeting, Lee told Howitt that his former student Ha, who oversees South Korea’s economic growth policy, is “focusing on growth through innovation” in line with the strategies Howitt had long taught him.
Howitt responded that the Lee administration’s pro-growth economic policies are in line with his growth theory.
“Under your administration, Korea has implemented some pro-growth policies that follow more closely what my longtime collaborator and fellow Nobel laureate Philippe Aghion and I have advocated for innovation-based growth,” Howitt told Lee.
“It’s especially gratifying on Teachers’ Day to see that what I have taught for so long is actually being implemented so well in the country.”
The gist of Howitt’s theory is that sustained economic growth is driven by intentional innovation, which continuously replaces outdated technologies with newer, better ones — a process known as creative destruction. Howitt was awarded the 2025 Sveriges Riksbank Prize in Economic Sciences, commonly known as the Nobel Prize in Economics, for his pioneering work on the theory.
“Korea is now on the global frontier of many advanced technologies and is pushing that frontier forward very rapidly. The large companies that have been responsible for Korean economic growth for so many decades are not resting on their laurels,” Howitt said. “They are continuing to innovate”
Howitt noted that the level of R&D spending in South Korea — which he described as the “ultimate proximate driver of productivity growth” — is the second highest as a percentage of GDP of any country in the world.
Howitt underscored the Korean government’s role in achieving sustained growth through innovation.
“Economic growth doesn’t just happen automatically. It does require government assistance and encouragement, and the financing of a lot of R&D activities on the part of private firms,” Howitt told Lee.
“I find it especially gratifying to see that in Korea, you are offering encouragement, incentives and financial support to startups and small and medium-sized enterprises that are really at the root of creative destruction, which is the ultimate driving force of economic growth.”
Howitt added that “At the same time, you’re taking sensible measures to make sure that growth is inclusive.”
Howitt also commended the Lee administration for navigating global economic turbulence while maintaining fiscal responsibility.
“One thing that I find amazing is how you have managed to do this in a fiscally responsible way in this very uncertain and turbulent world, where economic policy is facing a lot of headwinds,” Howitt told Lee. “You’re dealing with those headwinds, I think, as well as any country in the world.”
In response, Lee said, “Thanks to the indirect guidance you provided through senior secretary Ha Joon-kyung, the Republic of Korea now has the highest economic growth rate in the world in the first quarter of this year,” referring to South Korea by its official name.
dagyumji@heraldcorp.com
