Canadian-born economist Peter Howitt, who was awarded the Nobel Prize in Economic Sciences in 2025, is sounding a stark warning for his home country. He argues that Canada's institutions remain dangerously unprepared for the profound economic disruption that artificial intelligence (AI) will unleash in the coming years.
The Gathering Storm: AI and Monopolies as Dual Threats
Howitt, an emeritus professor at Brown University, shared his concerns in a recent interview, describing "dark clouds" gathering over the global economy. His Nobel-winning work on "the theory of sustained growth through creative destruction" is now facing its most significant test. He identifies two primary forces driving this uncertainty: the explosive rise of AI and the growing power of monopolies, particularly in the technology sector.
While AI represents a powerful wave of innovation, Howitt emphasizes that its destructive effects, especially widespread job losses, are not being adequately addressed by governments. Concurrently, he points out that dominant monopolies are stifling competition and hindering further progress in their markets, creating a dual challenge for economic resilience.
An Institutional Lag in a Time of Rapid Change
"I see the world progressing very much technologically, but not politically and institutionally," Howitt stated. He believes societies, including Canada's, lack the necessary frameworks to channel this new technology in constructive ways and to ensure its benefits are broadly shared.
The core of the problem, according to the economist, is a lack of preparedness for changes that demand openness, international cooperation, and collaboration between government, academia, and business. He calls for a concerted effort to find solutions that allow AI to boost productivity while simultaneously creating meaningful new jobs for those whose skills may become obsolete.
A Prescription for Canada's Economic Policy
When asked what specific policy path Canada should follow, Howitt pointed to several key areas. First, he advocates for reestablishing robust international trade networks and restoring academic mobility and freedom. He sees governments as essential in taking a leading role to navigate this transition.
Addressing Canada's own approach to creative destruction, Howitt acknowledged the political pressure to protect domestic industries with subsidies and regulation. While he is generally not in favour of such protectionism, he makes an exception given the current volatile climate. "When you have a particularly sudden change in the international environment... it does make sense to help companies survive at least the next few years until we see what's ahead of us," he explained, referencing the recent wave of protectionism from key trade partners like the United States.
His overarching message is clear: the technological march of AI is inevitable, but its economic and social fallout is not. For Canada to fend off the gathering storm, it must urgently strengthen its institutions, foster global cooperation, and develop proactive strategies to manage the creative destruction that lies ahead in 2026 and beyond.
