[THE VIEW]The Two Paths of Growth Driven by AI

The United States Restructures Work, Korea Upgrades Factories
Limits of a Manufacturing-Centered Strategy in a Country with a Shrinking Workforce

Artificial intelligence (AI) has moved beyond being a simple tool and has now become a new driving force for economic growth. In fact, the significance of AI's impact on economic growth has already been demonstrated by numerous studies. The International Monetary Fund (IMF) and the Organisation for Economic Co-operation and Development (OECD) have announced that advances in AI could increase global gross domestic product (GDP) by more than 7%. Especially in countries experiencing population decline, such as Korea, these institutions have concluded that improving productivity through AI is essential for economic growth. The Bank of Korea has also analyzed that the introduction of AI could boost GDP by 12.6% by 2050.

But are all countries utilizing AI in the same way to drive economic growth? The answer is no. Even when comparing just Korea and the United States, two major differences become apparent: the scale and main actors of investment, and the strategies for AI development and mechanisms of economic growth.

Both Korea and the United States are making significant investments in AI. However, the scale of investment in the United States is overwhelming. Of the total global AI infrastructure investment, which amounts to 400 billion dollars, more than half is accounted for by the United States. In addition, major tech companies such as Microsoft, Amazon, Google, and Meta are leading investments in data centers and semiconductors. These companies are expected to invest 527 billion dollars (about 700 trillion won) this year alone.

In Korea, it is government budgets and policies that are taking the lead. This year, the government has tripled its AI budget to about 7.3 billion dollars (about 11 trillion won) compared to last year. In addition, through the National Growth Fund, the government has decided to make long-term investments of 20.4 billion dollars (about 30 trillion won) in the AI and semiconductor sectors. The total investment, including private sector contributions, amounts to 72 trillion won, but this is still only about one-tenth the size of the United States' investment.

Korea and the United States also differ in their strategies for AI development. In short, the United States is pursuing a strategy of boosting economic growth by increasing labor productivity through AI, whereas Korea is seeking to maximize the effects of AI through hardware and manufacturing-centered growth. While the United States is restructuring its labor system and business models first, Korea is prioritizing changes in equipment and infrastructure.

Korea aims to become a powerhouse in "physical AI" centered on manufacturing, but in order to achieve continuous growth in an era of population decline, a strategic shift may be necessary to boost productivity by introducing AI across the service industry, similar to the United States. Photo generated by Google Gemini.

The way AI increases labor productivity in the United States is actually quite straightforward. Companies are focusing their investments on software and AI instead of maintaining or increasing their workforce. In other words, rather than simply supplementing existing employees with AI as a tool, they are actively reducing jobs themselves. In fact, the IMF has analyzed that the adoption of AI will lead to a 3.6 percentage point decrease in employment in AI-vulnerable occupations over the next five years.

Based on these projections, the Federal Reserve has taken a relatively optimistic view of economic growth rates for last year and this year, citing increased labor productivity due to AI. Thus, the introduction of AI in the United States can be a double-edged sword. While it may bring economic prosperity, it also carries the risk of creating an economic structure with large-scale unemployment and worsening wage inequality.

In contrast, Korea's AI strategy is focused on a manufacturing and export-oriented industrial structure. The government has declared its ambition to become a "physical AI powerhouse," announcing plans to introduce AI throughout robotics and manufacturing. To this end, more than 30 trillion won is being invested in the AI and semiconductor sectors, and large-scale funding is being poured into innovation in seven key manufacturing industries. Based on this strategy, Korea's growth outlook is also positive.

A financial research institute has forecast that Korea's real growth rate will recover from 1.0% in 2025 to 2.1% in 2026. The government also expects exports to increase by 3.8% in 2025 and by another 4.2% in 2026, potentially surpassing the all-time high of 700 billion dollars once again. The driving force behind this optimism is "AI semiconductors." As global AI investment continues to expand, Korea's semiconductor exports are expected to remain robust in 2026 as well.

However, considering Korea's unique situation of ongoing population decline, it is worth reconsidering whether the current strategy is truly optimal. Since the workforce is shrinking anyway, the American approach of replacing labor with AI might actually be more effective.

According to recent analyses by the IMF and OECD, labor productivity in Korea's service sector already lags significantly behind that of manufacturing. Therefore, for Korea to achieve sustained economic growth, it may be more appropriate to adopt a strategy of actively introducing AI across the entire service industry, not just in manufacturing, to boost productivity.

Seo Boyoung, Professor at Indiana State University, USA