Peter Howitt, a professor emeritus at Brown University in the United States and last year’s Nobel laureate in economics, answered reporters’ questions at a press conference in Seoul on the afternoon of the 15th. The question the Korean government most wanted answered came down to one: in a situation where the AI boom is expected to push the combined operating profit of Samsung Electronics and SK hynix this year beyond 600 trillion won, is it appropriate to return the increased tax revenue to the public in the form of a “national dividend”?
Howitt’s answer was clear. It can be summed up in one word: “premature.” He said, “No one knows where this new technology called AI is headed,” and added that “imposing taxes on the AI sector now is too radical.” At the same time, he praised the Korean government’s fiscal management, saying it is “doing a good job of implementing fiscal responsibility in growth policy.”
The debate began three days earlier. Kim Yong-beom, head of policy at the presidential office, mentioned a tentative “national dividend” system on Facebook, saying, “If a structural boom is created by Korea’s strategic position in the AI infrastructure supply chain, and that leads to unprecedented excess tax revenue, then deciding how to use that money is a matter of design that should naturally be considered.”
He went on to say that if AI-era demand for memory and infrastructure is a long-term structural shift, “Korea could become a country that produces sustained excess profits for the first time.” As the statement came from a senior presidential official, industry and academia were divided over the possibility that it could be translated into policy.
◆ Shadow of the supercycle: who will take the gains?
So far this year, the semiconductor market has entered a phase unlike any before. As the race to build AI data centers intensifies, prices for DRAM and NAND flash have surged nearly fourfold in just one year.
DRAM is memory used to temporarily store information in computers and smartphones, while NAND is storage that retains data even when the power is off.
Both are needed in huge quantities to run AI models, but supply is failing to keep up. Securities firms are projecting annual operating profits of 360 trillion won for Samsung Electronics and 270 trillion won for SK hynix.
Combined, the two companies’ operating profit would exceed 600 trillion won. That is equivalent to the scale of South Korea’s annual budget.
The issue is where this enormous wealth will flow. According to a tally by CEO Score, a corporate data research institute, as of May 11 the two stocks accounted for 42.4 percent of the total market capitalization of all listed companies in Korea.
Within the KOSPI alone, the figure rises to 46.9 percent. In other words, the fortunes of these two companies account for nearly half of the value of the Korean stock market. In a structure where their rise and fall are directly tied to the rise and fall of the Korean economy, the question of how society should share in the excess profits can no longer be postponed.
Howitt’s solution was: do not rush. He said, “When a large company’s operating profit is high, it imposes higher taxes and uses the increased tax revenue to invest in various fields or return it to society,” acknowledging Korea’s current corporate tax system.
But he added a caveat: “It is premature to determine whether the current approach is sufficient or whether more social redistribution is needed.” His diagnosis was that creating a new tax system and turning it into a fixed cost is risky when no one can guarantee that semiconductor demand will continue permanently as it is now.
◆ Samsung union’s strike card, and Howitt’s view that wages should follow performance
Another bombshell is the labor dispute at Samsung Electronics. Samsung’s labor union is demanding that 15 percent of annual operating profit be paid out as performance bonuses.
Based on projected earnings, that would amount to more than 50 trillion won.
With negotiations deadlocked, even the Central Labor Relations Commission’s post-mediation meeting held on the 12th at the Government Complex Sejong failed to find common ground.
As the possibility of a general strike was raised, voices emerged within the government saying, “Samsung Electronics’ profits were made possible by the investment and cooperation of suppliers, the government, and local communities.” It was a remark aimed at undermining the legitimacy of the union’s demand.
Howitt, while prefacing that he does not fully understand Korea’s labor system, was clear on principle. “If performance is good, it is natural for workers to move in the direction of demanding higher wages,” he said.
He added, “If performance is strong and company profits are high, wages should also rise, and conversely, if performance is weak, wages should be adjusted downward. That is a fairer way of sharing.”
This position differs from the government’s pressure-focused stance. In the United States and Europe, linking wages to performance is generally accepted, but in Korea, there have often been cases where wage increases remain limited even during boom periods.
◆ The answer to preventing a decline in potential growth: “Small and medium-sized businesses and startups are the key”
Forecasts that South Korea’s potential growth rate will slip into the high 1 percent range continue to pile up. Potential growth is the rate an economy can achieve without inflation, and a decline in that figure is a sign that the economy’s underlying strength is weakening.
Howitt addressed this issue head-on. “If I were in charge of Korea’s economic policy, I would focus on small and medium-sized businesses and startups,” he said firmly. “If you provide strong incentives, keep encouraging them, and support them financially, they will eventually become the source of creative destruction.”
The concept of creative destruction was first proposed in 1942 by Austrian economist Joseph Schumpeter. It is the insight that technological innovation drives economic growth, and that each new innovation overturns existing ways of doing things.
Howitt shared the Nobel Prize for mathematically formalizing this idea in 1992 together with Philippe Aghion, a professor at the Collège de France. For Howitt, the essence of creative destruction is not simply that the new replaces the old. It means a cycle in which, even if jobs in existing industries disappear, better jobs emerge to take their place.
He did not hold back in criticizing Korea’s research and development structure either. “Korea ranks second in the world in R&D investment as a share of GDP,” he said, “but right now it is investing in only a few fields, so it needs to expand its investments into many different areas.”
The point was that Korea’s R&D resources, concentrated in semiconductors and displays, must spread into diverse sectors such as biotech, energy, and materials for a truly innovative ecosystem to emerge. A strategy that pours everything into one field will collapse with that field.
◆ The answer to the AI shock: education and safety nets, not cash handouts
The question most often raised at the press conference was how AI will change jobs.
Howitt’s assessment was two-sided. He described AI as a form of creative destruction comparable to electricity, the steam engine, and the information technology revolution. In other words, it has the potential to overturn the entire economic system.
At the same time, he said, “Technological advancement does not destroy existing jobs; it creates new ones,” and predicted that “AI is increasing productivity and will make it possible to accelerate economic growth even more.”
But there was a caveat. The concentration of wealth and inequality in the AI era must be addressed not through cash handouts but through education and social safety nets.
Howitt cited Denmark’s “flexicurity” system as an example. Under this system, if a company lays off workers during the process of introducing new technology, the government subsidizes part of their wages.
It combines labor market flexibility with security: layoffs are permitted, but the government supports rapid transitions through retraining and reemployment.
That is different in tone from the national dividend being discussed in Korea, which would distribute cash uniformly.
He also proposed that the industry’s labor demand should be identified first, and then universities and schools should reverse-engineer curricula to match it. This is what he called “reverse-engineered education reform.”
He argued that the current system, in which universities train workers based on their own judgments before companies define what kind of talent they need, cannot keep up with the pace of change in the AI era.
This also explains why Korea, despite being among the world’s top countries in R&D investment as a share of GDP, suffers from such a severe mismatch between the labor market and the education system.
The national dividend issue is likely to undergo further review within the government for now. The Nobel laureate’s diagnosis that it is “premature” is likely to act as a brake on policy implementation.
Still, the fundamental question of who will share in the enormous 600 trillion won in gains, and how, remains unresolved. Howitt’s recommended solution was clear: macroeconomically, diversify R&D across more fields and nurture small and medium-sized businesses and startups.
At the micro level, let wages be distributed naturally according to performance. And absorb the shock of AI disrupting jobs not through cash handouts, but through educational reform and social safety nets.
How policymakers interpret the answer sheet handed down by the Nobel laureate is now the real test.