[The World on the Page] Look at the Number of Patents to Gauge the Scale of 'Creative Destruction'

Three Scholars Who Unveiled the Link Between Innovation and Growth
The Core Concept Driving Capitalist Dynamism
How Stagnant Economic Systems Determine Sustainable Growth
Balancing Competition and Protection for the Vulnerable Is the Answer

The 2025 Nobel Prize in Economics has been awarded to Joel Mokyr, Professor at Northwestern University in the United States; Philippe Aghion, Professor at the Coll?ge de France in France; and Peter Howitt, Professor at Brown University in the United States. These three scholars have continued Joseph Schumpeter's concept of 'creative destruction,' researching the relationship between technological innovation and economic growth. The reason for their selection was "for elucidating the mechanisms of technological progress and innovation, which are key drivers of sustained economic growth."

Jang Eunsoo, publishing culture critic.

Creative destruction refers to the process by which entrepreneurs pursue innovation-such as new products, new methods of production, and the cultivation of new markets-thereby transforming existing economic structures. Capitalism is characterized by the endless dynamism of this process, driven by market competition and the pursuit of profit. When innovation is rapidly introduced and disseminated throughout society, growth accelerates. The three scholars demonstrated how creative destruction comes into conflict with vested interests and how, when the state fails to manage this process effectively, those with vested interests can obstruct innovation.

Innovation does not arise spontaneously, nor does it last long. This is due to 'Cardwell's Law.' According to British historian Donald Cardwell, no country that once led innovation managed to sustain technological advancement for more than a few generations, eventually losing competitiveness and declining. European history attests to this. During the Renaissance, the centers of innovation in Europe were northern Italy and southern Germany. However, the leading regions shifted to Spain and Portugal after the opening of Atlantic trade routes, to the Netherlands during the Reformation, to Britain during the Industrial Revolution, and to Germany and the United States by the late nineteenth century. The reason innovation gradually faded in leading countries was that vested interests, having accumulated immense wealth through past innovations, began to hinder new innovation.

Technological innovation is influenced by social systems and culture. The development and adoption of technology disrupt old beliefs and conventions. In societies that revere tradition or are dominated by outdated religions and customs, innovation cannot spread. Conservative forces always say, "If it isn't broken, don't fix it." These were the people who brought Galileo before the Inquisition. Moreover, innovation destroys outdated organizations and societies. Vested interests do not welcome innovation. They exert pressure to reshape social systems in their favor, ensuring rent-seeking and unearned income. They reduce wealth and inheritance taxes and erect barriers to new technologies. As a result, the state gradually loses vitality and competitiveness. The key to sustained development lies in maintaining a political and economic system that does not suppress but rather encourages innovation.

How can a society where politics favors and stimulates innovation be achieved? In 'A Culture of Growth' (Ecolivre), Mokyr compares Britain and China during the Industrial Revolution and points to culture as the answer. According to him, the cultural revolution that took place in sixteenth-century Britain-namely, the Enlightenment-caused the growth gap between the two nations in the modern world.

Until the 1700s, Europe and China were on par in terms of social institutions and technological advancement. Like Britain at the time, China also had active commercial activities, a developed monetary economy, a high level of education, a low illiteracy rate, and widespread dissemination of knowledge through books. Property rights to land were protected, and early signs of capitalism could be seen in the mining industry. However, the seeds of innovation never truly sprouted in China. This was because there were no cultural entrepreneurs like Francis Bacon or Isaac Newton.

The existence of an open marketplace of ideas is the most effective way to foster creative destruction and economic growth. Bacon and Newton stimulated the systematic production of scientific knowledge and fostered a culture that led to the accumulation and dissemination of 'useful knowledge' for the realization of human desires. As a result, seventeenth-century Britons believed that intellectual innovation could genuinely improve society, sought to verify knowledge through facts and experiments, and developed technologies based on that knowledge to transform reality. This encouragement of innovations such as the steam engine led directly to the Industrial Revolution.

However, in China, a hierarchical culture centered on the emperor, an education system focused on producing civil servants, and a society based on extended families suppressed challenges to authority and the spread of innovative thinking. The academic climate, which fixated on philology and textual criticism, stifled experimentation and criticism, leaving no room for heterodox intellectuals or innovative thinkers. Even merchants, instead of challenging the established order, sought to emulate the lifestyles of the scholarly elite.

By the 1820s, the gap between the two countries had widened. In Britain, a culture that praised 'useful knowledge' gave rise to technological innovation and explosive economic growth, while China, having missed the Industrial Revolution, stagnated. The outcome is well known. According to Mokyr, only in societies that combine pluralistic cultures with competition among ideas does innovation persist.

In 'The Power of Creative Destruction' (Ecolivre), Aghion argues that the number of registered patents is an indicator of how much creative destruction occurs in a country. For example, the number of international patent applications from South Korea increased from 23 in 1985 to 4,689 in 2005-an approximately 200-fold increase in twenty years-and further to 23,851 in 2024, another fivefold increase. Since productivity growth and the intensity of innovation are proportional, as innovation weakens, growth also slows. In such circumstances, the role of politics is crucial to sustaining innovation.

Aghion criticizes the longstanding growth theory that economic growth can be sustained solely through capital accumulation. Investing capital in outdated machinery or production structures yields diminishing returns, and growth slows. For sustained economic growth, capital must be invested in the advancement and accumulation of knowledge and the development of technology to enhance the quality of innovation, and politics must play a catalytic role in ensuring that established interests cannot impede the spread of innovation.

The state must boldly remove barriers to competition so that innovative companies can enter the market quickly, while simultaneously strengthening social safety nets to ensure that those harmed by innovation, such as the unemployed or displaced, are not left behind. Without promoting both competition and protection for the vulnerable, as well as economic growth and the mitigation of inequality, innovation will eventually halt and growth will end. This is what happened in the era of neoliberalism. The rise of Trumpism and the spread of protectionism are the consequences. The current world, where protectionism is rampant and authoritarianism is resurging, ultimately stifles technological innovation and impedes creative destruction, resulting only in prolonged stagnation. By awarding the Nobel Prize in Economics to these three scholars, the Nobel Committee may have intended to sound a warning.

Jang Eunsoo, Publishing Culture Critic