AI needs an innovative free market to grow - and only one country offers it

By Mark A. Jamison

China's top-down approach and Europe's regulations stifle AI's potential

America's open-market strategy allows innovation to thrive.

Committees and bureaucracies can limit AI, but they cannot create meaningful value.

U.S. companies released 40 major AI models last year; China released 15, and Europe, just three. This is not an accident. Innovation thrives in environments that allow many ideas to compete, evolve and attract resources. The free market - not a government ministry - decides which ones deserve to grow.

Artificial intelligence is transforming nearly every corner of the global economy. Three-quarters of businesses worldwide already use it. The market for AI will reach roughly $240 billion this year and could exceed $1 trillion by 2031.

Yet while investment in AI surges, unease is rising too: Two-thirds of Americans say they're nervous about AI, and barely a third say they're excited.

The tension between AI's immense promise and widespread anxiety has spurred governments to try to seize control of AI's direction. But the world's three dominant approaches couldn't be more different: China's top-down strategy, Europe's stack of precautionary regulations and America's market-driven openness.

The results show clearly which one fosters innovation and growth.

Regulations restrict growth

China has declared its goal of global AI leadership by 2030. It is orchestrating the effort from the top down: funding businesses and research; promoting national champions and embedding AI across the economy, from industry to military to government surveillance. Government planners see AI as both an economic tool and an instrument of social control. But planned innovation is an oxymoron. Innovation, by definition, is surprise.

Europe's approach is less authoritarian but still controlling. The European Union has made digital sovereignty an organizing principle, weaving a tangle of overlapping rules - including its AI Act, Digital Markets Act, Data Governance Act, Data Act, and General Data Protection Regulation - meant to govern information, manage risk and control Big Tech. The Association of German Banks calls Europe "a global pioneer in regulating AI." That may be true - but the rest of its statement tells the real story: "Meanwhile, other regions are world leaders in the development and profitable application of AI."

America innovates

Then there's the United States. Rather than trying to dictate AI's direction, America relies on what it does best: open markets, entrepreneurial energy and a generally deregulatory stance. Federal policy emphasizes workforce development, energy and manufacturing capacity, and - so far - restraint in rulemakings. Innovators, investors, and users, not bureaucrats, are deciding which AI technologies and products are created and which succeed.

The results speak for themselves. In 2024, U.S. private investment in AI reached $109 billion - close to 12 times China's $9 billion and 24 times the United Kingdom's $4.5 billion. American researchers - led by industry - published twice as many highly cited AI papers as their Chinese academic and industry counterparts and roughly four times as many as those in Europe.

China's command-and-control approach limits both the diversity of ideas and the ability to build upon success. Europe's precautionary mindset, in its zeal to prevent harm and constrain American companies, prevents much of the experimentation needed for progress.

America's model is messy, and sometimes unsettling. It produces bursts of creativity alongside sincere worries about bubbles, risk and job displacement. But it also produces breakthroughs - the kind that create new industries, new jobs and new sources of national strength.

Ironically, the United States leads the world both in AI innovation and in anxiety about it. That ambivalence is understandable, but the temptation to let fear drive regulation should be resisted: State legislatures have considered over 1,000 AI-related bills in 2025, many of which would have restricted data use and limited when and how AI may be used. The lessons from this year's Nobel Prize winners in economics are clear: freedom to experiment, invest and fail yields more progress than government blueprints.

So, who will control AI? No one person or entity - and that's the point. Party committees and bureaucracies can limit AI, but they cannot create meaningful value. It is the millions of entrepreneurs, engineers, investors and consumers deciding what works that drive value. That's how capitalism creates and exploits surprise. And it's why, if America stays true to its tradition of openness and competition, the future of AI - and the prosperity it brings - will be its gift to the world.

Mark Jamison is a nonresident senior fellow at the American Enterprise Institute, where he works on how technology affects the economy. He is concurrently the director and Gunter Professor of the Public Utility Research Center at the University of Florida's Warrington College of Business.

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-Mark A. Jamison

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11-08-25 1156ET