CEI Report: AI Industrial Policy Schemes Create “Misalignment by Design” and a New AI Welfare State

A new report from the Competitive Enterprise Institute contends the greatest risk associated with artificial intelligence is not technological misalignment but what author Wayne Crews calls “misalignment by design”— the deliberate fusion of government power, corporate rent-seeking, and social and economic management.

“The greatest AI threat isn’t technological, it’s political,” said Crews. “When government becomes a partner, funder, regulator, and customer simultaneously, AI is destined to serve political priorities rather than the needs of consumers, innovators, and entrepreneurs.”

“Instead of asking how AI can expand prosperity and independence, policymakers are increasingly asking how AI can finance a larger welfare state,” said Crews. “That’s a profound shift away from innovation and toward political management – a grave misalignment of priorities.”

The report, Welcome to the Machine: How Schemes to Control AI Are Progressive Tools to Control Society, focuses on OpenAI’s recently released Industrial Policy for the Intelligence Age. Presented as a framework for managing AI risk, the proposal advances detrimental industrial policy, government-business coordination, workforce planning, and expanded federal involvement in economic life and household affairs, Crews believes.

“OpenAI warns about the ‘serious risks’ of artificial intelligence while proposing policies that would align technology with political power,” said Crews.

The report highlights three overarching concerns:

Misalignment by Design: Industrial Policy, Militarization, and Centralized Control: Proposed AI frameworks rely on subsidies, standards-setting, public-private partnerships, federally backed testbeds, workforce programs, procurement preferences, and new governance institutions. Often justified by competition with China, these approaches risk entrenching dominant firms, suppressing competition, politicizing innovation, and concentrating authority in government-aligned institutions—often through regulatory “dark matter” rather than legislation or formal rulemaking.

AI as a Vehicle for Welfare-State Expansion: Rather than demonstrating how AI-driven prosperity could reduce dependence on government programs, leading proposals envision expanded unemployment benefits, wage supports, public wealth funds, workforce-transition programs, and other redistribution mechanisms. The report argues that such approaches point toward Universal Basic Income-style arrangements, transforming AI’s productivity gains into a rationale for expanding the entitlement state. Instead of fostering greater independence and self-reliance, AI risks becoming the latest justification for a new era of managed dependency.

AI-Enabled Surveillance and Social Control: Centralized AI governance frameworks risk facilitating surveillance, censorship pressures, federally aligned research agendas, and political manipulation of AI systems under the guise of safety, equity, and misinformation prevention.

“A genuine alignment policy—or AI Bill of Rights—would constrain government first,” Crews writes. “The real danger is not misalignment by accident. It is misalignment by design.”

> View the report, Welcome to the Machine: How Schemes to Control AI Are Progressive Tools to Control Society, by Clyde Wayne Crews, Jr.

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