AI: “Existential Crisis” or Excuse for Cronyism?

(Mises)—Several months ago, I was on a long car trip with my dad, and we listened to a podcast that gave some commentary on the following headlines from the New York Times and the Wall Street Journal: “AI Poses ‘Risk of Extinction,’ Industry Leaders Warn” and “AI Poses ‘Risk of Extinction’ on Par with Pandemics and Nuclear War, Tech Executives Warn.”

Obviously, this was in the wake of new AI technologies like ChatGPT and others. This is also not a new issue. In 2017, the Wall Street Journal also published “Protecting Against AI’s Existential Threat.” Of course, AI has been impressively more developed recently, bringing the usual reactions—assumptions that this technology will totally change everything, amused interest, reasonable concerns (e.g., students cheating), and the typical hand-wringing.

All this was in response to a recent statement from the Center for AI Safety, who posted an open letter with the following warning: “Mitigating the risk of extinction from AI should be a global priority alongside other societal-scale risks such as pandemics and nuclear war.” As these claims were made, even by creators of the technologies, I had a sneaking suspicion that I already knew what these AI companies wanted: cronyism. Not long after that, my suspicions were confirmed by the inevitable call for that one, vague, seemingly magical word that everybody seems to demand in situations like these. That word is “regulation.”

Arguing a similar point soon after the announcement of this “existential threat,” another writer from the Wall Street Journal perceptively wrote an article titled, “AI is the Technocratic Elite’s New Excuse for a Power Grab.” That said, while there is certainly a penchant for the technocratic elite to form and expand bureaucracies in order to regulate, it is worth mentioning that very often these very companies are themselves the biggest proponents of government regulation of their industries.

Why would private firms ever want cumbersome government regulation? The answer is cronyism. Cronyism, crony capitalism, “crapitalism,” corporatism, managed capitalism, a “mixed” economy, or fascism are different titles for the same concept. Whatever the designation, it is a public-private partnership that employs the powers of the state to grant special legal privilege to non-State entities for their mutual benefit at the expense of the consumer/taxpayer.

Private businesses and government are often not enemies but very comfortable friends. More than that, their working together is always in the name of protecting the consumer/taxpayer. Depending on their ideology, people might see themselves teaming up with business against the government or teaming up with government against business, but they rarely recognize that there is a third option—government and business teaming up against the consumer/taxpayer.

By inviting “regulation,” private firms can use the legal apparatus of the government to limit competition, raise barriers to entry for competitors, restrict output for higher prices, and shift the costs of “health and safety” standards to the taxpayers. These are options that businesses and industries would never have save an alliance with the state. The taxpayers will pay the government, via bureaucratic agencies, to inspect and maintain certain standards for businesses, which removes the costs of these standards from the business, subsidizes their operations, and places them on the taxpayer. Oddly enough, this regulative bureaucratic apparatus can simultaneously be burdensome by hampering the productive aspects of a business, assistive in providing for costs to businesses and industries that they would otherwise have to bear, and incompetent in the goal of protecting consumers.

A costly regulatory burden for competitors, an attempt to capture the market, movement toward monopolization, the government as enforcer, and getting the consumer/taxpayer to pay for bureaucracies to write more regulations and inspect standards: What business wouldn’t at least be tempted?

Cronyism has a long history. In fact, monopoly used to mean exclusive legal grants of government privilege to certain companies, not arbitrary standards like firm size, number of firms, or market share. Cronyism has also had a long history in the United States, especially since the Progressive era (ca. 1890–1920). We are often told that the Progressive era involved the government intervening to stop monopoly when the truth is precisely the opposite—the government intervened with a new bureaucratic technocracy, usually at the request of private firms, to stifle competition and impose monopoly.

This took place in all sorts of areas, such as meatpacking, insurance, textiles, money and banking, etc. It turned out, according to G. Edward Griffin, that use of the word “reform” would be enough: “The American people are suckers for the word ‘reform.’ You just put that into any corrupt piece of legislation, call it ‘reform’ and people say ‘Oh, I’m all for “reform,”’ and so they vote for it or accept it.”

Furthermore, while the tendency in America was toward competition, this was unacceptable to many businesses who invited and embraced new “regulations” and “reforms.” Writes historian Gabriel Kolko, “Ironically, contrary to the consensus of historians, it was not the existence of monopoly that caused the federal government to intervene in the economy, but the lack of it.” The simple solution was, “Monopoly could be put over in the name of opposition to monopoly!” The same word was used, but the content could be the opposite. Government, itself a monopoly, was to monopolize industries because, if it didn’t, monopolies might result!Many vaguely call for “regulation” because they may not know what else to ask for whenever they see a problem, but often businesses call for it to use the governmental apparatus to their benefit at the expense of the consumer/taxpayer.

As the new and growing AI industry develops, it should be no surprise that they want “regulation.” It is probably not that they really believe that the AI technology they produce is a literal threat to human existence, but that, by leaning into the scaremongering and the statist non sequitur, they can form a cozy relationship with the government first and legally limit competition to their benefit. The American people are suckers for “reform.”