---
type: source
title: "AI Arms Race 2.0: From Deregulation to Industrial Policy"
author: "AI Now Institute"
url: https://ainowinstitute.org/publications/research/1-3-ai-arms-race-2-0-from-deregulation-to-industrial-policy
date: 2025-12-01
domain: grand-strategy
secondary_domains: [ai-alignment]
format: report
status: unprocessed
priority: high
tags: [arms-race-narrative, industrial-policy, deregulation-cloaked-intervention, governance-capture, belief-1, regulation-sacrifice]
---

## Content

Section 1.3 of the AI Now Institute's 2025 Annual AI Landscape Report. Documents how the "AI arms race" framing has evolved from simple deregulation to a more sophisticated form of state intervention cloaked in deregulation language.

**Core finding:** The AI arms race has taken on a new character in 2024-2025. It is no longer simply "reduce regulation" but a "slate of measures that go far beyond deregulation to incorporate direct investment, subsidies, and export controls in order to boost the interests of dominant AI firms under the argument that their advancement is in the national interest."

**The paradox:** "One of the most interventionist approaches to technology governance in the United States in a generation has cloaked itself in the language of deregulation, with the federal preemption of state authority to govern AI framed as the removal of bureaucratic obstacles from the path for American technological dominance."

**What the arms race framing accomplishes:**
- Companies are expected to focus less on targeted advertising and more on AI for national security
- Defense tech increasingly featured at Hill & Valley Forum (formerly tech/innovation focus)
- In February 2025, Google amended its guidelines to allow AI for military weapons and surveillance, reversing a long-standing ban — arms race narrative provided political cover
- Both Biden and Trump administrations used "investment, executive authority, and regulatory inaction to push American AI firms ahead of their competitors"

**The scope of deregulation in 2025:**
- Broad deregulation campaign aimed at "sectors critical to artificial intelligence including nuclear energy, infrastructure, and high-performance computing"
- Goal: "remove regulatory barriers and attract private investment to boost domestic AI capabilities"
- Includes: easing restrictions on data usage, speeding up approvals for AI-related infrastructure projects

**The "common sense" mechanism:** "The 'common sense' around artificial intelligence has become potent over the past two years, imbuing the technology with a sense of agency and momentum that make the current trajectory of AI appear inevitable, and certainly essential for economic prosperity and global dominance."

## Agent Notes

**Why this matters:** This report confirms that the arms race narrative now operates at the level of "common sense" — an assumed framing that doesn't need to be argued, only invoked. This is a qualitative shift from the nuclear-specific regulatory capture documented in prior sessions. When the narrative operates as common sense, it can be applied to ANY domain without requiring a specific argument connecting that domain to AI competition. This is the mechanism by which Mechanism 2 (indirect governance erosion) operates: the deregulatory common sense pervades the regulatory environment, and domain-specific dismantle happens through whatever justification frame is convenient (DOGE, efficiency, anti-regulation ideology).

**What surprised me:** The report's framing that the most interventionist governance approach in a generation is calling itself deregulation. Federal preemption of state AI laws (blocking California AB316 expansion, Colorado, Texas, Utah) is being called "removing bureaucratic obstacles" — the language of deregulation is being used to describe the largest federal assertion of authority over AI in history.

**What I expected but didn't find:** Specific data on which non-AI regulatory domains have been explicitly targeted by the arms race narrative (beyond nuclear). The report covers the macro pattern; domain-specific cases need the AI Now "Fission for Algorithms" report (already archived) for nuclear and the Abiri paper for the theoretical framework.

**KB connections:**
- [[global capitalism functions as a misaligned optimizer]] — The AI arms race narrative is the specific political mechanism by which capitalism's misalignment becomes state policy
- [[technology advances exponentially but coordination mechanisms evolve linearly]] — The arms race narrative is the mechanism by which the gap widens: it converts deregulatory "common sense" into active coordination dismantlement
- Multi-level governance laundering synthesis — The "intervention cloaked as deregulation" framing is a specific instance of governance laundering (Level 5-ish: the domestic regulatory preemption level)

**Extraction hints:**
1. CLAIM CANDIDATE: "The AI arms race narrative operates as 'common sense' that provides political cover for any deregulatory action adjacent to AI infrastructure — by making AI competition appear inevitable and existential, the narrative creates a default justification for dismantling safety governance in any domain (nuclear, biosecurity, consumer protection) without requiring a specific argument connecting that domain to AI competition" (confidence: experimental, domain: grand-strategy)
2. ENRICHMENT: Multi-level governance laundering synthesis now has a domestic-regulatory-preemption level — the most interventionist federal governance approach in a generation calling itself deregulation. This is governance form (language of deregulation) vs. governance substance (federal preemption of state mandatory AI safety governance).
3. The AI Now report's "AI common sense" mechanism explains WHY arms race narrative can be deployed across domains without domain-specific argument: when the competitive framing is assumed, domain-specific safety governance appears as obstacles rather than protections.

## Curator Notes
PRIMARY CONNECTION: Multi-level governance laundering synthesis + [[technology advances exponentially but coordination mechanisms evolve linearly]]
WHY ARCHIVED: Provides the "common sense" mechanism explanation for how the arms race narrative extends beyond AI governance without requiring explicit argument. The "intervention cloaked as deregulation" paradox is the best single description of Level 5 governance laundering found across all sessions.
EXTRACTION HINT: The extractor should focus on the PARADOX (most interventionist governance in a generation called "deregulation") and the COMMON SENSE mechanism (narrative so pervasive it doesn't need to be argued). These are the two analytically distinct contributions beyond what the Abiri paper covers. Don't duplicate the "prisoner's dilemma" analysis — that's Abiri's contribution.
