Colin Chow, National University of Singapore
When the Nobel Committee awarded the 2025 Prize in Economic Sciences to Joel Mokyr, Philippe Aghion, and Peter Howitt, it did more than recognise three scholars whose work reshaped how we think about growth; it cast a quiet but unmistakable light on an economy standing at a crossroads. Mokyr’s account of the “Industrial Enlightenment” (IE) evokes a world in which modern prosperity emerged not from resources or luck, but from a rare alignment of forces: ideas moving freely across borders, the technical capacity to turn those ideas into reality, and institutions willing to reward experimentation and tolerate disruption. Aghion and Howitt (1992) gave this history its mechanism, showing how progress depends on new technologies restlessly challenging the old. These are not distant abstractions, but the gears that have driven innovation for two centuries. Today, those gears are beginning to grind.
When Ideas Hit New Walls
In November 2025, several developments revealed a subtle but dangerous shift in how global innovation operates. The United States expanded export controls on advanced AI chips and data centre services, threatening to remove tens of billions of dollars from the research budgets of leading firms. Days later, China banned foreign AI chips from its state-funded data centres, ordering facilities less than 30 percent complete to remove all installed foreign hardware. Meanwhile, China temporarily lifted its ban on exporting critical materials like gallium and germanium to the US, a move clearly tied to trade diplomacy rather than open global collaboration. At the same time, Europe’s semiconductor strategy under the European Chips Act is showing signs of over-rigidity, with a funding model slow to react to market shifts and increasingly criticised for hindering rather than fostering dynamic innovation.
These stories share a common theme: the fragmentation of useful knowledge. Mokyr (2002) taught us that growth depends on ideas moving across borders. Policy, geopolitics, and trade friction are now erecting fences where once there were bridges. The cost is not speculative. Autor, Dorn, and co-authors (2020) show that restrictions on Chinese firms reduced innovation among upstream suppliers, with measurable declines in patent output and citation-weighted impact. Akcigit and collaborators (2021) similarly find that disruptions to international knowledge networks weaken innovation by limiting access to foreign ideas and complementary inputs. When firms lose access to global knowledge flows, the scale and scope of innovation contract, weakening both diffusion and long-run productivity growth.
The Fraying Link Between Insight and Execution
Knowledge is only half the story; the other half is mechanical competence, the ability to turn ideas into production. Aghion and Howitt emphasised that productivity gains accumulate only when new technologies scale, replace older ones, and engage in competitive rivalry. When geopolitics intervenes, that link weakens in a historically documented way.
The Cold War offers the clearest precedent. The Coordinating Committee for Multilateral Export Controls (CoCom), established in 1950, sought to deny strategic technologies to the Soviet bloc. Its most consequential effect was not denial but fragmentation: it forced Eastern bloc countries into parallel, siloed development rather than shared progress. Mastanduno (1992) documents how the Soviet Union was compelled to duplicate systems the West was already collectively refining, consuming resources without generating the competitive displacement that drives productivity growth. Thane Gustafson, writing in 1981, found a growing realisation within Soviet policymaking that concentrating resources on isolated projects “cannot produce rapid gains in productivity and quality for the economy as a whole.” Even when the USSR obtained foreign technologies, the inputs required to develop, operate, and iterate on them were rarely transferred successfully. Lind and Mastanduno (2025) conclude that the Soviet Union fell behind not because it lacked access to key technologies, but because its isolated system could not absorb, diffuse, or commercialise them.
The parallel to the present is direct, and results are already visible. China’s ban on foreign AI chips risks replicating the Soviet pattern of duplication and fragmented resource allocation. Yet the more instructive case is what happened despite the controls. In January 2025, DeepSeek released its R1 reasoning model, which matched the performance of OpenAI’s leading systems at a fraction of the training cost, wiping over $600 billion from Nvidia’s valuation in a single day. CSIS analysis found that DeepSeek’s breakthrough was rooted in algorithmic and architectural efficiency achieved largely on chips stockpiled before controls tightened, demonstrating that fragmentation does not stop innovation; it redirects it in ways that are harder to anticipate and control. The US policy response has been correspondingly erratic: the Trump administration approved H200 chip sales to China in December 2025, then imposed a 25 percent tariff on those same chips weeks later in January 2026. In Europe, the Chips Act’s slow responsiveness suggests that mechanical deployment is becoming rigid rather than agile, precisely the opposite of what Aghion and Howitt say growth requires.
A World Moving From Openness to Vigilance
Beyond knowledge and machines lies the institutional bedrock: markets that reward challengers, legal systems that protect innovators, and cultural norms that tolerate disruption. Mokyr argued that the IE operated because institutions allowed the “conversation of the learned” to transcend geography and social status. Aghion emphasised that competition is the crucible of innovation. What we now see is an institutional shift in the opposite direction. Europe’s drive for strategic autonomy, China’s restrictions on foreign technology, and the US’s increasingly weaponised export regime all point toward innovation islands rather than an integrated global system.
The logic is understandable. Security matters. But the consequence is less obvious: when institutions prioritise control over contestability, innovation slows, and the controls themselves become difficult to sustain. The history of CoCom is instructive here too. Even under favourable conditions for multilateral coordination, the regime was persistently undermined by commercial defections and enforcement failures. Today, chip smuggling through third countries has become common enough that the US Justice Department charged multiple defendants for transshipment schemes through Thailand and Malaysia in 2025, and Congress advanced the Chip Security Act in early 2026, proposing to embed location-tracking hardware directly into exported chips. Regimes built on control tend to fracture under competing commercial and security interests, leaving all parties worse off than a more open equilibrium would have.
The Dilemma of Small States in a New Geography of Innovation
For a small, open economy like Singapore, the stakes are acute. Its growth depends on linking into global knowledge networks, tapping foreign-born human capital, and integrating cutting-edge technologies not yet developed locally. This is not Singapore’s first encounter with an externally imposed threat to that role. Huff (1978) documents that Raffles founded Singapore in 1819 precisely to counter Dutch trade protectionism, which had left Britain without, in Raffles’s own words to the East India Company, “an inch of ground to stand upon between the Cape of Good Hope and China.” His response was to declare Singapore a free port, and entrepot trade soon rose to nearly 40 percent of its total commerce. The founding logic, that openness was a survival strategy rather than a preference for a small node in a contested network, is the same logic that confronts Singapore today.
The threat is concrete. Singapore has already surfaced in enforcement actions as a node through which restricted chips were diverted, reflecting how middle nodes in global trade networks become pressure points when large powers tighten controls around them. If the world fragments into technology blocs, Singapore must choose between retreating into a niche or doubling down on its role as a bridge node: a place where ideas circulate, experimentation is protected, and firms compete globally rather than nationally. The Nobel framework suggests this role is precisely where growth potential lies, not in seeking national champion status, but in enabling global contestation and innovation.
What Remains of the Industrial Enlightenment?
What we are witnessing is less a technology race than a systemic test of the conditions that enabled the IE in the first place. One path leads toward an innovation ecosystem that remains open, competitive, institutionally vibrant, and globally linked. The other leads toward fragmentation, duplication, stasis, and insularity. The Soviet experience under CoCom is the most complete historical experiment we have in what the second path looks like: parallel systems, wasted resources, and a widening gap between scientific capacity and productive application.
If knowledge flows are hampered, mechanical competence becomes patchy, and institutions begin to protect incumbents rather than challenge them, the result will not be immediate collapse but a gradual slowdown of growth dynamics. Creative destruction gives way to creative insulation. The laureates’ work suggests that innovation thrives when challenge is constant and openness is broad. What we see in the headlines suggests a world increasingly choosing control over creation.
Concluding Remarks
What the laureates ultimately remind us is that innovation is not a natural law. It depends on habits of openness and competition that societies must actively choose to maintain. The recent drift toward national technology blocs and managed industrial policy shows how quickly those habits can fade. The danger is not that breakthroughs will stop; DeepSeek has shown they will not. The danger is that they will matter less if they circulate in smaller, more insulated systems, absorbed by fewer actors and generating less of the competitive displacement that drives long-run growth. Whether we avoid that future will hinge on decisions being made now, not in grand declarations, but in the daily choices governments make about where ideas can move and who is allowed to challenge whom. The IE was built on a wide world for ideas; preserving that space is the real test ahead.