Taiwan should look beyond manufacturing in AI era: Nobel economist

Taipei, May 12 (CNA) Taiwan and other advanced economies should look beyond manufacturing as AI accelerates automation and reshapes labor markets, Peter Howitt, who shared the 2025 Nobel Prize in Economic Sciences, said Tuesday.

Speaking at the Master Forum in Taipei, the Canadian economist suggested that AI will have a neutral impact on job creation over the long term, but the global decline in manufacturing employment that was evident before the advent of AI cannot be reversed.

"Manufacturing employment was falling in almost every country, even where the manufacturing output was really rising," Howitt said. "This is just going to continue."

"The jobs of the future will not necessarily be in manufacturing," he added, arguing that many future jobs would instead emerge in service industries.

Howitt described AI as a "general purpose technology" comparable to electrification and the computer revolution, saying such breakthroughs often create major labor-market disruptions before their broader economic benefits become clear.

While AI is likely to eliminate some jobs, it will also create new occupations over time, he said, but economies will ultimately need to prepare workers for new industries and service-oriented jobs as AI continues reshaping production and employment worldwide.

He suggested that governments should invest more in education, worker retraining and alternative energy development to adapt to the transition.

Howitt is best known for his work with French economist Philippe Aghion on "creative destruction," a theory first proposed by Austrian economist Joseph Schumpeter describing how innovation drives economic growth by continuously replacing older technologies, firms and jobs with new ones.

Howitt and Aghion later brought the idea to modern economic growth theory through an emphasis on the role of innovation, competition and incentives, arguing that technological progress is driven by advances in science and by firms seeking profits through new technologies.

The pair's work later became known as the "Aghion-Howitt model," which describes growth as a recurring cycle in which new innovations temporarily dominate markets before eventually being replaced themselves.

Howitt said decades of research had shown that innovation depends heavily on competition, openness to trade, intellectual property protection, human capital and cooperation among governments, businesses and academia.

He cited Taiwan Semiconductor Manufacturing Co. (TSMC) as an example of successful industrial coordination.

"So much of the success of Taiwan, of course, has been the result of one tremendously successful company, TSMC, whose origins lie in cooperation with the government and a lot of government finance," he said.