What to make of the spectacle of Sam Altman, the boyish face of all things AI, coming to Washington to beg for … regulation? In his written testimony, Altman declared: “OpenAI believes that regulation of AI is essential.” Not only that, he offered to help policymakers get it done.
In response, our nation’s senators fell over themselves to hail Altman as a selfless techno-prophet, at one point going so far as to offer him the job as chief regulator over artificial intelligence. Instead, they should have been asking themselves why a powerful entrepreneur who currently dominates an industry would be so welcoming of regulation in the first place. (Spoiler: It’s not just any regulation, but we’ll get to that in a bit.)
In the popular imagination and in so much political rhetoric, regulation of business is portrayed as a plot to clip capitalists’ wings. But history suggests that’s not quite right. Powerful business interests have openly advocated for regulation in the past, much as Altman recently did. But then, as now, the motivation was more about the companies’ own profit and competitive advantage than it was about the greater good.
Though state and local regulations have a long history, the first significant wave of federal regulation in the US took place in the late 19th and early 20th centuries. The “Progressive Era,” as it’s commonly called, saw a coalition of middle-class reformers bring the freewheeling, corrupt capitalism of the Gilded Age under a new regulatory regime governing everything from the railroads to meatpackers.
This characterisation of the period, which hardened into conventional wisdom by the 1930s, would come into question in the postwar era, when several academics began questioning whether business was quite as hostile to regulation as everyone assumed. Skeptics’ ranks included the political scientists Marver Bernstein and Samuel Huntington, both of whom wrote influential studies suggesting that business had turned Progressive Era regulatory agencies toward their own ends.
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The historian Gabriel Kolko went one step further. In 1962, Kolko published his Triumph of Conservatism, which advanced the heretical claim that “business leaders, and not the reformers, inspired the era’s legislation regulating business.” In fact, Kolko argued, “regulatory movements were usually initiated by the dominant business to be regulated.”Typical of Kolko’s view was his account of the meatpacking industry. Previously, most historians had credited Upton Sinclair’s stomach-churning novel The Jungle with opening the door to long-overdue regulation. In the process, disreputable slaughterhouse industry giants like Swift & Co. were dragged kicking and screaming under the watchful eyes of federal regulators.
Kolko, though, mocked the idea that Sinclair had “brought the packers to their knees.” In fact, he concluded that the biggest meatpackers “were warm friends of regulation” because only the biggest packers, not their smaller, less organized competitors, had the resources to comply with the new restrictions. Regulation was a way of restraining competition and protecting market share. Kolko observed that Swift and its fellow industry giants celebrated passage of the Meat Inspection Act of 1906 with advertisements declaring: “It is a wise law. Its enforcement must be universal and uniform.”
In this first book and in a more focused study titled Railroads and Regulation, published in 1970, Kolko offered a sweeping indictment of what he believed to be a naïve, simplistic understanding of the relationship between government and business. Kolko argued that regulatory agencies overwhelmingly served the interests of big business, which adeptly used them to fix prices and restrain competition. Railroads, for example, worked with the Interstate Commerce Commission to mute competition, ensuring higher profits via stable freight rates. For other industries, incumbent firms embraced regulation as a way of rewarding their capital investments in cutting-edge technology. For example, the condiments king Henry J. Heinz and brewer Frederick Pabst benefited greatly when Congress passed food purity laws that enshrined their methods of manufacturing as the new standard, leaving smaller rivals at a distinct disadvantage.
Kolko’s writings provoked intense debate in academic circles, with critics arguing that the story was inevitably more complicated. It didn’t help, perhaps, that Kolko wore his leftist politics on his sleeve, infuriating more moderate historians. Ironically, he found the most hospitable reception among libertarian economists like George Stigler.
In 1971, Stigler published an article titled “The Theory of Economic Regulation” that provided a theoretical understanding for why regulation almost always ended up serving the interests of big business. This became known as the theory of regulatory capture, which held that large, incumbent firms typically used regulations to thwart competitors. The analysis went on to become one of the most-cited economics articles ever written, helping Stigler win the Nobel Prize in Economic Sciences in 1982.
Not that you would know any of this from watching Congress lap up Sam Altman’s pleas for regulation of the blossoming AI industry. Instead, our senators swallowed the tech titan’s testimony with all the skepticism of a bunch of slack-jawed yokels listening to a carnival barker.
That Altman has singlehandedly steered what started out as an altruistic nonprofit venture into a for-profit corporation joined at the hip with industry behemoth Microsoft Corp. didn’t seem to give the senators any pause. Nor did the fact that OpenAI and its ilk have arguably engaged in the greatest theft of intellectual property in human history to create their thinking machines. Instead, we were treated to the sad spectacle of Louisiana Republican Senator John Kennedy imploring Altman: “Tell us what rules to implement.”
It is instructive that a little over a week after Altman’s plea for regulation, he threatened to exit the European Union after the trading bloc began drafting AI regulations that his company didn’t get to dictate. That’s hardly surprising given that Europe doesn’t have quite the same historical tradition of cozy relations between regulators and big business. The EU might, egad, actually put the public interest ahead of Altman’s profit.
Though Altman walked back his threat, it’s a harbinger of things to come. Congress needs to wake up and recognise that while AI may well be new and novel, the tech sector’s pleas for regulation — particularly those of an incumbent like OpenAI — are straight out of a playbook written by the biggest businesses of the Gilded Age.
