Howitt Says AI Is Still Young, Urges Wait-And-See Approach on Taxing Samsung and Hynix Profits on April 15
Peter Howitt, last year’s Nobel Prize laureate in economics and professor emeritus at the Department of Economics at Brown University, holds a press conference and answers questions from reporters at the ‘Paradigm Shift for Reversing the Growth Trend’ conference hosted by the Korea Development Institute (KDI) at the Westin Josun Seoul in Jung-gu, Seoul, on May 15. (Provided by the Korea Development Institute)
Peter Howitt, last year’s Nobel Prize laureate in economics and professor emeritus at the Department of Economics at Brown University, stated this at the ‘Paradigm Shift for Reversing the Growth Trend’ conference hosted by the Korea Development Institute (KDI) at the Westin Josun Seoul in Jung-gu, Seoul, on May 15, saying, “Someday AI may create a concentration of wealth and tax revenue, but before heading in that direction, we must wait and see how the situation unfolds.”
Professor Howitt, who attended the conference as a keynote speaker on this day, expressed his position at a separately held press conference that one should be cautious about the idea of connecting the profits earned by semiconductor companies such as Samsung Electronics and SK Hynix due to the semiconductor boom to the clawback of excess tax revenue or an ‘AI tax.’
Previously, Kim Yong-beom, Chief of Staff for Policy at Cheong Wa Dae (Presidential Office), proposed a ‘national dividend system’ through his Facebook on May 12, stating, “The fruits of the artificial intelligence (AI) infrastructure era are not the result drawn out by a specific company alone.” He added, “If the strategic position in the AI infrastructure supply chain creates a structural boom, and that leads to unprecedented excess tax revenue, how to spend that money is not a matter of choice but a matter that must rightly be deliberated.”
Professor Howitt said, “One of the reasons the South Korean government was able to implement fiscally responsible growth policies is thanks to the increased tax revenue from large conglomerates,” and added, “It is too early to judge whether that is sufficient and whether it should be additionally clawed back.”
He stated, “AI is still a very young technology, and we do not know where it will go in the future,” adding, “It is also unknown whether semiconductor manufacturers will continue to produce good results as they do now.”
He continued, “It is difficult to be certain whether a radical measure like an AI tax is necessary,” and explained, “There are also measures to help young people better prepare for new technologies, such as the Danish ‘Flexicurity’ system or the reorganization of the educational curriculum through industry-academia cooperation.”
Professor Howitt foresaw the possibility that AI, rather than unilaterally increasing inequality, could increase the productivity of low-skilled and entry-level workers by automating repetitive cognitive tasks.
He said, “AI can further raise the income potential of those at the bottom of the human capital distribution.”
This is interpreted as a remark contrary to the words of Chief of Staff Kim Yong-beom who connects the semiconductor boom with discussions on a Norwegian-style sovereign wealth fund or a national dividend.
Kim had argued, “If excess tax revenue is not generated, a national dividend will be an absurd story,” but added, “Letting the fruits of that excess profit slip away without any principles could be even more irresponsible.”
However, Professor Howitt sympathized with the very awareness of the problem that the benefits of AI should be shared by society as a whole.
He also provided an outlook that AI may not necessarily act only in the direction of increasing income inequality.
He explained, “AI tends to automate repetitive cognitive tasks performed by many people,” and added, “Rather, it can further raise the income potential of those at the bottom of the human capital distribution.”
Regarding the issue of performance-based pay distribution and labor-management conflicts centered around Samsung Electronics, Professor Howitt called it a “very difficult political and economic issue,” yet stated that worker compensation should also increase when corporate performance is good.
He said, “When corporate profitability is high, compensation must also be high, and when profitability is low, wages must also be lowered,” adding, “Moving toward a structure where profitability and wages are symmetrically linked is a labor issue that takes time.”
Professor Howitt also pointed out that although the South Korean economy has world-class competitiveness in the semiconductor and AI sectors, it is difficult to maintain a long-term growth path by relying only on a few large conglomerates and specific industries.
He said, “South Korea is a global leading nation in the semiconductor and AI sectors and must continue to innovate in this,” but added, “It cannot rely solely on a few sectors.”
At the same time, he emphasized, “Small and medium-sized enterprises and startups are the ultimate source of creative destruction,” adding, “Especially since South Korea has entered the technology frontier in various fields, strong incentives and financial support must be provided to these companies.”
Jung Suk-yee
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