A Tale of Two Malls: the economics of an ailing American icon

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Westside Pavillion, 2008., Los Angeles, California.

If you want to find an example of the current state of American shopping mall, you may want to take a visit to Westside Pavillion in Los Angeles. Like so many dying malls across the US, Westside Pavillion is an eerie, empty site during operating hours. In better days, the mall was the site for movie shoots and music videos. Now, anchor stores like Nordstrom and Macy’s have left the mall, leaving only the Landmark Theatre, Urban Home, and Macy’s Furniture Gallery behind. The mall is set to close in 2021, and will be remodeled for office space for media and tech companies. Westside Pavillion’s story isn’t unique. For instance,  a quarter of American malls are in danger of closing.

However, some other shopping malls tell a different story. If you take the twenty minute drive to The Grove, you’ll find a different sort of retail story. Customers flock towards it’s luxury department stores and stroll through a nostalgic boulevard with a matching emerald green trolly. Built in 2001, as a “Main Street for a city that does not have one” some may see the Grove as a shining example of the new american mall. You can find the same  open air, luxury stores, and experiential designs in other popular, revamped malls like Westfield Century City and Santa Monica Place.

The Grove, Los Angeles, California Source: Wikimedia Commons

So why are some malls doing better than others? While many American malls are closing, the survivors are adapting in order to accommodate the new offline retail experience: luxury goods and attractions.  As online retail continues to grow, dying malls and retail also affect labor demands and deplete a form of revenue for some vulnerable counties.

Symptoms

How does a mall begin to die? Data shows that one symptom was the Great Recession. plowing While the recession helped put brick-and-mortars like Toys ‘R’ Us, Sports Authority, and Circuit City out of business, it had a lasting effect on malls as well. General Growth Properties, which owned almost 18 percent of American malls during the recession, filed for bankruptcy in 2009. A lack of customer traffic drove profits down. It was difficult to turn dying malls into repurposed spaces due to declining property values and the subsequent end of the building boom. Online retail also aided in the decline of American malls following the Recession.  While internet retailers represent just about 10 percent of retail sales, mall stores like Claire’s, Radioshack, and Pacsun struggled to compete with online demands.

As both department stores and small tenants began to close, vacancy rates began to rise. In 2008, the total vacancy rate for US shopping malls was 7.1 percent, compared with 5.8 percent in 2007. However, there is some evidence that the mall development explosion in the 80s and 90s just created too many stores to survive through economic recession. For example, almost 60 percent of Macy’s closing stores today are within 10 miles of another Macy’s location.  

In contrast, Nordstrom, a department store with higher price-points, has adapting changes in online retail. In addition to opening more locations, Nordstrom generates almost a quarter of its sales online, that rate is higher than its competitors in Macy’s, Kohls, and Jacey Penney who hover around 15 percent. Even with the rise of e-commerce, sash-strapped middle and working class customers have found other avenues to find what they need for lower prices. Ulta Beauty, TJ Maxx, and the Home Depot have moved into fill the needs that these anchors used to fill and continue to open stores.

When anchors close, the smaller tenants close up shop, leading to more dying malls. As of October 2018, closings of anchors like Sears, Bon-Ton, and JC Penney and mall stores like J. Crew, Abercrombie & Fitch,have pushed the total enclosed mall vacancy rate to 9.1%.   However, while B, C and D class malls- or malls in “in less desirable locations and home to less coveted tenants with lower sales per square foot” are vulnerable to vacancy rates and closing, the luxury mall or A class, has shown signs of success.

 

Only the Strong (or Wealthy) Survive

“Within 10 to 15 years the typical U.S. mall, unless completely reinvented, will be seen as a historical anachronism, “said Grove developer Rick Caruso at a National Retail Federation’s annual convention in 2014.

The “typical U.S. mall” had a Macy’s, Boscovs or Dillards. It had parking lots, skylight, and a food court. It catered towards a growing middle class with cash to spend with stores that fit their income bracket. But, Class A malls, or the kind of retail experience that Rick Caruso has built with the Grove: luxury department stores, expensive brands, and fine dining with a walkable “main street.”

While other Class A malls may lack the Caruso’s visual flare, the bare bones of their business plan is similar.  The King of Prussia mall, the second largest mall in the US, underwent a 155,000-square-foot expansion and ushered in luxury tenants like Cartier and Jimmy Choo. While luxury department stores like Neiman Marcus, Saks Fifth Avenue, and Nordstrom have fewer stores, they have locations in the majority of the the nation’s most successful malls.

According to research by Boenning &  Scattergood, the 20 most valuable malls in the country make more than 21 billion in retail sales. According to Fung Global Retail & Technology, just a fifth of the nation’s luxury malls generate more than 75 percent of mall revenues.

At the same time, income disparities continue to widen in the US. According to Vox, in the years between 1980 and 2018, “the poorest half of the US population has seen its share of income steadily decline, and the top 1 percent have grabbed more.”

“It is very much a haves and have-nots situation,” said D. J. Busch, a senior analyst to the New York Times. Wealthier americans “will keep going to Short Hills Mall in New Jersey or other properties aimed at the top 5 or 10 percent of consumers. But there’s been very little income growth in the belly of the economy.”

Data also shows that millenials have less money than previous generations, as stagnant wages, debt, and rising housing prices cause millenials to spend “nearly $20 less every day than their counterparts roughly 10 years ago,” according to a recent Gallup poll.  And as almost three quarters of millenials prefer to spend more on experiences than material items, the malls have to adapt to that need with expensive renovations.

As anchor stores marketed towards working-to-middle-class clientele close and brick-and-mortar retail demands change, luxury malls remain. If all the business has flowed towards malls with the ability to finance opulence and entertainment, what happens to the communities that called those now dead malls home?  

A Post-Apocalyptic Future

As customers lose their shopping malls, local workers lose their jobs. According to the Bureau of Labor Statistics, Department stores have shed 500,00 jobs since 2002, which is almost is almost 18 times more workers than coal mining.

Before the Recession, 2.4 million workers were staffed in retail than manufacturing and health care. However, ten years later,  the education and health services industry employs more than 34.48 Americans, while the retail industry employs 20.3 million.   

 

 

The rise of e-commerce industry has also opened up job operuntities. Amazon and other companies continue to higher more and more workers to staff fufillment positions in warehouses, all the while holding competitions to develop even more effecient robots to work in those warehouses.  

Even as American workers adapt to changing demands, communities will have to adjust from the revenue benefits of brick-and-mortar retail. Montgomery County,PA gets 50 percent of its revenue from the King of Prussia mall, the 2nd largest mall in the US. However, the county is the second wealthiest in the state by income with around a $40,076 per capita income.Other counties across the mid-atlantic region stand to be affected by the loss of the revenue from regional malls and access to jobs. Berks, Columbia, Allegheny and other Pennsylvania counties all have dying malls in 2018 and have per capita incomes less than $29,000.

The labor force participation rate decreased by more than three percentage points from 2000 to 2015. While unemployment rates remain low, fewer workers will have to support a growing retired population in the future. At the same time when other emerging employment opportunities in the gig economy have a technological timestamp, the transformation of the American mall is more than just the end of food courts and your local department store, but also provides insight into the changing nature of work, income, and consumer behavior in the US.

Behind ‘fast fashion’ brands are underpaid workers working in sweatshops

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Lured by the promise of a restaurant job paying $1,000 a month, Yeni Dewi travelled to the United States on a tourist visa in 2013. Once here, she realized she had been trafficked. She was forced to work as a domestic help at a house in Sherman Oaks near Santa Monica. She worked 18 hours daily and was paid $200 every 35-38 days. She managed to escape after a couple of years and has been a garment worker ever since.

Currently she works at a garment manufacturing factory near the intersection of Wall Street and 8th Street on the outskirts of the Fashion District in downtown L.A. Dewi said that the factory is a supplier for Fashion Nova. But she earns around $300-$350 per month even though she works for at least 40 hours every week.

“I don’t like the situation…but I have no other choice,” said Dewi, who is mother to a daughter here and a son who lives back home Indonesia with his grandmother.

Yeni Dewi with her daughter

According to a report by CIT Group Inc. and the California Fashion Association, the fashion industry in Los Angeles generates at least $18 billion in revenue. However, behind the world of mass-produced garments from fast fashion brands like Zara, Forever 21 and Fashion Nova, lies an underbelly of exploited workers receiving less than minimum wage and working in sweatshop conditions.

The minimum wage in the City of Los Angeles is presently $12 or $13.25 an hour, depending on the size of the business. According to the first quarterly report of 2018 of the California Employment Development Department, the hourly median wage of a worker in the garment and textile industry was $11.81. Despite state law mandating that all garment workers must be paid at least the minimum wage, many say that they don’t even get half of the designated amount.

“We are earning like $5 an hour right now, when every year it [the minimum wage] rises up to $12, $13 and so on,” she said. “In L.A, the minimum wage rises every year, but the piece rate never rises.”

According to the piece rate, each garment worker is paid around 70 cents for each “operation” like stitching the sleeves to the main body of a dress or joining the two sides of a shirt. Dewi said the total amount earned by a worker per garment depends on the style, but generally comes to around $2.

Mariella Martinez of the Garment Worker Center said that part of the reason that garment workers receive such low wages is that the big, sometimes multinational, brands that the factories supply refuse to increase their prices. This puts the onus solely on the owners of the factories to pay decent wages. The owners, in turn, are often unwilling to cut into their own profits. They also have to compete with manufacturing plants in Asia or Central or South America where labor is cheaper and labor laws are less stringent.

“If it is $15 an hour [for labor] in the United States and in California, that is a day’s labor in Mexico and two days’ labor in China,” said Ilse Metchek, the president of the California Fashion Association.

The Association, which Metchek said deals with, “the voice of the industry, the business of the business,” was formed in 1995 in the aftermath of the El Monte Slavery Case.

Metchek said that manufacturing has decreased in Los Angeles and will keep on decreasing over the years. The industry however is still huge. In 2016, Business Wire found that wholesalers in the industry added roughly 1500 jobs each year.

In 2016, researchers from UCLA studied the wage claims processed through the Garment Workers Center and found that workers earn an average of $5.15 an hour. Despite state legislation that holds manufacturers liable for wage and hour violations in the garment manufacturing industry, there is also little governmental oversight or enforcement.

Many of the factories operate illegally in garages, sheds, or abandoned properties, making it very difficult for government agencies to monitor them, said Dewi. They also do not provide health benefits, holidays or insurance and workers often have to work in sweatshop conditions.

Dewi has worked in factories where there were no bathroom or lunch breaks and the workers there had to bring their own clean water and toilet paper, she said.

Virgilda Romero, another garment worker, also described working in unsafe and unhygienic conditions.

“I worked at a factory between Broadway and Main streets on Adams where things were really bad…They would make me do a lot of the cleaning. So I would be in charge of cleaning the bathrooms and also like catching killing the rodents and then so I would deal with like rat pee falling on me and things like that,” said Romero. “I wouldn’t work sometimes on Sundays and they would leave the trash over, so there would be like maggots in the trash.”

Virgilda Romero at the Garment Worker Center

Romero arrived in the United States from Guatemala in 2001. She has worked in the garment manufacturing industry for more than 16 years. The first factory she worked at paid only 5 cents a piece. She has also worked in places where the employers would pressure her to work faster and not allow her to take any breaks. There have been times when she worked for 11 hours a day, Monday through Saturday, and sometimes even on Sundays to earn enough to survive.

Romero said that her present employer was much better and pays her around $470 for six-day weeks. Even then, when she informed her that she would be unable to work for some days due to a surgery, she got very upset and said, “You’re going to miss work again. You better get healthy quick so that you can come back to work as soon as possible.”

“I was very nervous because I’ve been taking these medications that make me have to go to the bathroom a lot because of the surgery and I was, you know, kind of scared the whole time that she would get angry for taking so many restroom breaks,” said Romero.

According to the California Bureau of Labor Statistics, 71 percent of the garment workers are immigrants, mostly Latinx and Asians. While both Romero now has valid work permit, many of the workers are undocumented immigrants and some are, like Dewi, victims of human trafficking.

The owners of the factories easily take advantage of their workers because they know that they are in precarious positions and will be too scared to go to the authorities to file wage claims or complaints about work conditions, Martinez said. Many are simply not aware that even though they are undocumented, they still enjoy certain rights.

For instance, Dewi did not speak English or Spanish when she first arrived in the United States. She was also not aware that she had certain rights as a victim of human trafficking. She was hiding both from her traffickers and also immigration authorities. She was scared that if she went to the police, they would arrest her for not possessing valid work permits. She did not realize that the garment industry was short-changing her as well.

“When I was working for my traffickers, they only paid me $200 [every 35 days]…and I didn’t get any holidays. In the garment industry, I got like $200 or $150 a week, and I thought it was good,” said Dewi. It was only after lawyers with the Garment Workers Center made her aware of her rights did she realize how low her wages were.

Dewi’s documentation is being processed and she hopes she will soon be able to apply for a green card and bring her son to Los Angeles.

As a member of the Garment Workers’ Center, Dewi often helps them with their campaigns. She said that most importantly the industry needs to abolish the piece rate.

“The first thing we are gonna to do is get minimum wage for the workers and then everything else, step-by-step, said Dewi. “We are gonna ask for health and safety and everything else.”

Labeling carbon like calories

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The world emitted 32.5 gigatons, or 32.5 billion metric tons, in 2017. Globally, agriculture accounts for 24% of these greenhouse gas emissions, with livestock accounting for about 14.5% to 18%. This makes animal production alone more polluting than the entire global transportation industry. And though agriculture isn’t always the most popular topic when it comes to policy conversations around climate change, the data make a compelling argument to change the way we consume livestock.

Pie chart showing emissions by sector. 25% is from electricity and heat production; 14% from transport; 6% from residential and commercial buildings; 21% from industry; 24% from agriculture, forestry and other land use; 10% from other energy uses.

Source: EPA

According to Drawdown, the self-proclaimed  “most comprehensive plan […] to reverse global warming,” a shift to plant-rich diets is the fourth most impactful solution (out of 80) to achieve this goal, with the potential to reduce atmospheric CO2 by 66.11 gigatons.

 If 50 percent of the world’s population restricts their diet to a healthy 2,500 calories per day and reduces meat consumption overall, we estimate at least 26.7 gigatons of emissions could be avoided from dietary change alone. If avoided deforestation from land use change is included, an additional 39.3 gigatons of emissions could be avoided, making healthy, plant-rich diets one of the most impactful solutions at a total of 66 gigatons reduced.

Despite the well-documented research on the benefits of a plant-rich diet, global meat demand has remained untouched, and consumption in all animal categories has increased linearly since the 1960s. It doesn’t appear to be slowing down.

Source

A recent paper authored by Joseph Poore of Oxford University and published in Science indicates both alarming new research regarding food emissions and revisits pragmatic solutions. Poore’s findings corroborate existing research that animal products, particularly red meat, contribute substantially more to greenhouse gas emissions than any plant based food. Average emissions, or kilograms of CO2 equivalent, for 100g of protein in beef are 50 kgCO2eq. For peas, that number is 0.4 kg, or 0.8%. Beef emissions are unequivocally higher, even when factoring in high quantities of “food miles” that many plants bear. Food miles indicate the distance, say, an avocado from Mexico has to travel to the café in Notting Hill where you enjoy your avocado toast on a Sunday morning.

Poore revisits a powerful solution: give more power to the consumer. Food consumption is a uniquely personal choice involving individual preferences and dietary requirements, making any restriction on high carbon food consumption undesirable. Poore advocates for labeling a food’s carbon impact, a measure that would aim to reduce the overall demand for animal products. Reducing demand would theoretically reduce production, as is necessary in the free market, profit-maximizing model. In practice, carbon labeling would look like an additional piece of information required on nutrition labels. Carbon impact, like calorie content, would be required.

On unpackaged food, carbon may be labeled on the grocery store tags or on the glass panes that shelter the meat counter. Enforcement of a policy such as this not only democratizes information regarding food impact, but also allows customers to make conscious choices about the foods he chooses to purchase.

Providing more information to the consumer nearly always sounds like a good idea. But there are very real costs associated with a benefit such as this. Labeling all food products requires impact studies and manufacturing changes. Simply updating a food label costs businesses, on average, $6,000 per SKU, a significant cost for firms that produce hundreds of food items. We could imagine that labeling carbon may cost much more, as there are no current metrics to update—the data would have to be created for the first time. This information would be gleaned from impact studies, research that derives from tracing each ingredient to its origin and calculating its carbon impact throughout the supply chain, an activity that is sure to be much more costly than traditional nutrition labels, where information can be tested and obtained in a lab. Supply chains are rarely transparent or easy to track, and doing so will cost substantial amounts of money for companies to comply. There is also the matter of verification. Should companies be charged with labeling the carbon impact of each product, it would be easy, and almost predicted, that some of those numbers may be inaccurate and, therefore, counterproductive. To execute this successfully there must be verification agencies in place—auditing for environmental impacts, not just financial ones.

To many companies, $6,000 or more per item is pocket change. For others, like emerging start-ups in the food industry or small family farms, it’s the end of a company. That said, food giants are constantly updating their labels to market their product’s “new look, same great taste!” Carbon labels gives companies a new excuse to rebrand! This does, however, puts extraordinary pressure on small players in the industry like family grocers, many of whom are providing the healthiest, least polluting items. This dynamic indicates the need for government subsidies to assist financing large projects such as this.

Government subsidies may cause public outcry, particularly given the intense budget negotiations and lobbying power in Washington. In 2017, the United States government issued $16,185,786,300 dollars in farm subsidies, over $7 billion of which was allocated to commodities. Over $5 billion dollars was allocated to corn subsidies alone in 2017, a crop that’s primary use is—yes—to feed livestock.

chartSource: World of Corn

If we were to allocate a fraction of these subsidies away from crops that we artificially overproduce, we could provide substantial funding for these impact studies that may assist in tangibly relieving the environmental impact of carbon in the food system. This money would not be difficult to find—the low-hanging inefficiency fruit in the budget office is bountiful and ripe. The Economist reports that “between 2007 and 2011 Uncle Sam paid some $3m in subsidies to 2,300 farms where no crop of any sort was grown. Between 2008 and 2012, $10.6m was paid to farmers who had been dead for over a year.”

By offering initial subsidies to domestic companies, we could numb the pain of a potentially jarring regulation to offset the initial start-up costs associated with new research and a new labels. After this research and methodology improves and becomes standardized, government subsidies could eventually be eliminated, and costs to individual companies would be normalized.

Do we really need to put a carbon label on kale, though? Can’t we trust the common consumer be educated enough to distinguish between environmentally impactful foods and benign ones? Not really, and it’s not because consumers are inept. Adrian Williams, an agricultural researcher commissioned by the British government to study the carbon imprint of different foods, addressed this succinctly in a 2008 New Yorker essay.

“Everyone always wants to make ethical choices about the food they eat and the things they buy… And they should. It’s just that what seems obvious often is not. And we need to make sure people understand that before they make decisions on how they ought to live.”

Perhaps the most glaring hurdle to implementing these labels is educating consumers enough that they understand them. In 2007, Tesco, the largest supermarket chain in Britain, pledged to put carbon labels on all 70,000 of their products. Four years into the project, the grocer abandoned the initiative “because the message [was] too complicated” after labeling only 500 products. Though the move to change business strategy was multi-faceted, Tesco’s decision ultimately came down to two elements: no one else followed suit, and consumers didn’t know how to read them.

Developed with the Carbon Trust, most of these labels appeared like black and white footprints with the correlated grams of CO2 emitted printed in the middle. And while these labels offer a point of comparison in the lower corner, most consumers simply look over this fact. When I myself was living in London for a few months, I saw these labels frequently and had no idea what they were, and I didn’t bother to find out, either.

These labels must not only be designed better, but we must also educate the public about what they mean. This means more media coverage, more government campaigns, and more exposure to the labels at a young age. Demand and, therefore, the carbon impact of the food system, will not change if consumers don’t know what’s going on.

As with all new ideas, these suggestions are bound to bring warranted debate and discussion, but the debates alone should not discourage us from enacting such policies. As with any action, there are trade-offs. An investment in labeling carbon is a plausible first step towards investing in a new version of economic growth that considers environmental health in addition to financial.

A common argument against carbon labeling is the question of where in the supply chain tracking begins. And doesn’t it all get too complicated? We can get wrapped up in the idea of where the carbon tracking starts and if the gasoline the farmer used to buy the seed that planted the corn should be accounted for in that model. But those nuances, while crucial in the execution, miss the point. Carbon labeling gives us the benefit of comparison between products. It doesn’t matter where in the supply chain it starts, as long as its standardized and a true reflection of reality. The most crucial element of this all is that the average man going grocery shopping on his way home from work can easily see that a pound of ground beef produces a lot more carbon than a pound of turkey. It’s then up to the consumer how far he wants to exercise his carbon freedoms. Maybe he’ll become a vegetarian, but maybe he’ll just choose to eat turkey tonight. That may be where we are as a society right now. And that’s okay.

Because there will not be a strong economic advantage to choose a food item lower on the carbon impact scale, it’s necessary to note that this measure alone will not sufficiently change market conditions to reduce emissions. It is, however, a powerful way for early adopters to advocate through purchases, and an effective way to spread information about the impacts of individual choices on the environment.

On a practical level, this is a policy for consumer education. On a philosophical level, this is a policy to get people closer to the goods they consume, exposing, label by label, what’s really going on in the supply chain.

To be clear, labeling carbon will not curb emissions enough to actually meet the IPCC’s goal of 1.5 degrees C of warming. True and meaningful action requires putting a real price on carbon reflective of its value and integrating the environment into our economic fabric. This policy must be part of an ecosystem of changing action, thought, and discussion. This policy is forcing consumers to literally look at their choices in black and white and show them the environmental costs of a lifestyle. Carbon labeling is not going to save the icecaps, but it may be our best chance at bringing consumers closer to the goods we consume.

The Third Revolution in Warfare

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“Hey Alexa, turn on the living room lights.” This commanding sentence has become the norm in thousands of households across the country. Alexa, Amazon’s voice-based artificial intelligence device, is used to perform daily tasks in a hands-free manner – and this is just the beginning. Artificial intelligence is slowly but surely being integrated into people’s everyday lives. Not only is this tech phenomenon finding its way into our homes, it is also gaining traction in the military sphere and will continue to take root in the coming years. With that being said, does the future of warfare solely belong to the machines? What are the economic consequences of incorporating similar hands-free devices into a war zone? It is important to look closely at the integration of artificial intelligence into the traditionally rigid institution that is the United States military and weigh the economic effects. The amount of funding and the number of jobs that will be impacted due to a deeper implementation of the technology into the military will evolve with time, but let’s examine the current impact.

Considering the current trajectory of funding towards the advancement in artificial intelligence in the United States military, one would think all of the focus is on funding and creating the next machine army. According to DARPA, the Defense Advanced Research Projects Agency, “the President’s FY2018 budget request for DARPA is $3.17 billion and the FY2017 budget request was $2.97 billion.” The attention the federal government is getting for its investment in artificial intelligence for defense purposes is both positive and negative. Supporters feel it is a must to stay ahead of the curb in warfare, but it seems alarming to many who are unaware of what artificial intelligence actually is and what its involvement in the military will look like. Artificial intelligence is changing the way we approach problems in this world, as well as changing the way we fight. When the general public reads, “Artificial intelligence in the military,” they assume robot soldiers, but that is not necessarily the case. Their ignorance is heightened by Silicon Valley giants who publically speak out about implementing artificial intelligence into the defense industry. According to BBC News, Elon Musk, Stephen Hawking and 998 other technology experts, scientists and researchers, mostly of Silicon Valley, wrote a letter that cautioned the use of artificial intelligence in a military capacity. This pushback from those who seem to be the leaders of innovation, in a general sense, created a stigma and fear around the employment of artificial intelligence into military strategy.

Military officials tend to disagree with the leaders in Silicon Valley. I asked Col. George Haynes, head of the Air Tactical Assault Group and Cyber Group Commander at Berry Field National Guard Base in Nashville, TN, his thoughts on the role of artificial intelligence in the military. He answered, “I would project that artificial intelligence would be pushed to the boundary to accumulate data, provide firing options, and to provide constant courses of action for destroying targets. However, the ‘trigger’ to launch such weapons will likely stay with a human being sending the command.” He also emphasized that, “machines will not take over, but, politically, organizations (military or civilian) will leverage artificial intelligence, but, it will not negate human interaction. As a result, with all technologies constantly evolving, artificial intelligence will become a force multiplier and a tool that will be used to meet national policy.” With military leaders on board, like Col. Haynes, artificial intelligence is inevitably the future of warfare. With that being said, what is the economic effect on military jobs?

According to the Department of Defense, coming in at “one-third of the DoD budget, military pay and benefits are, and will likely always be, the single largest expense category for the Department.” The Department also stated, “people are the Department’s most valuable asset, but DoD must continually balance these requirements with other investments that are critical to achieving the Department’s strategic goals.” With manpower being a main focus of the current military, it is important to investigate how much of the budget will be shifted away from military personnel to machines. According to The Fiscal Times, “each soldier in Afghanistan costs the Pentagon roughly $850,000 per year.” In opposition to that figure the report also found “the TALON robot—a small rover that can be outfitted with weapons, costs $230,000.” It is cheaper to fund a robot than the sum of all the expenses necessary to maintain a live, full-time soldier. This figure does not take into account children outside of the spouse.

Although these figures seem daunting for military personnel, there will not be much to worry about. Col. George Haynes weighed in on this fear by stating, “artificial intelligence will provide an avenue for aggressively identifying and projecting problems, solutions, and costs. However, I would not expect a decrease or increase in overall jobs due to an artificial intelligence effect. I also interviewed Col Vince Franklin, Chief of Staff and Commander of the 119th Cyber Operations Squadron in Alcoa, Tennessee, about the effect artificial intelligence will have on military jobs and he added, “technology has significantly reduced the human footprint in the military. That trend will continue but as for artificial intelligence replacing humans on weapon systems, I do not see the US military allowing artificial intelligence to actively engage the enemy without a human in the loop.”

For the military, technology should always allow repurposing of manpower for the areas that we are constantly low in numbers like front lines, underwater and in the air. In addition, artificial intelligence may prove to increase overall worth of the staff support working directly with it and thereby securing current and future jobs. The Department of Defense has already implemented a system called Project Maven that will help ease artificial intelligence into the normal workings of military surveillance and weaponry. One of the creators, General Jack Shanahan explained in an interview with National Defense Magazine that “the end goal is to expand AI and the other cutting edge technologies across all elements of the intelligence enterprise and then beyond, ultimately affecting every aspect of the department’s operations, he said. That would include applying them to such fields such as predictive maintenance, logistics, medical care, communications and infrastructure.” Ultimately, the Pentagon wants to keep as many humans in the loop as possible and sees this as an advantage to military personnel, not a movement that will take away their jobs.

Not only will military jobs be affected, even though they may not be affected to the extent many imagined, world powers will feel a ripple effect as well. The United States military is the top military in the world and has been in the driver’s seat for quite some time now. The United States may lose its first place spot in military prominence as a result of China’s investment in artificial intelligence. There is an arms race between world powers, including the United States, Russia and China, and it is coming down to the wire. An article by CNN Politics examined the roadmap the Chinese Government created to outline its plan for advancement of artificial intelligence in terms of government funding. It states, “artificial intelligence has become the new focus of international competition. Artificial intelligence is the strategic technology that leads the future.” China is investing more money, manpower and attention into artificial intelligence to win that first place spot for the world’s strongest military power. In my conversation with Col. Vince Franklin, he emphasizes that he, “believes China will continue to grow economically but artificial intelligence will drive a very small portion of that growth. The United States is still the cradle of innovation.” Col. George Haynes agreed stating that China and the United states will work together on artificial intelligence, “only for a gain in advantage within Diplomacy, Information, Military, or Economic elements of national power will the two counties engage in innovative support. I do think that the United States will continue to leverage partnerships within the business world which will include the Asian theater. Possibly, this will instigate or provide an aggressive approach for the US to leverage critical partnerships for innovation in China.”

The United States already faces some issues keeping it from gaining traction in artificial intelligence. One is the pushback from Silicon Valley mentioned earlier and the other is Silicon Valley’s lack of interest in helping the public sector. There has always been a disconnect between the private and public sector in regard to technology, so this rift is not helping the United States military receive the best and the brightest in artificial intelligence. The best innovators want to go to Silicon Valley. The United States federal government tends to stifle new, challenging ideas when it comes to advancements in technology. According to Defense Intelligence Agency Director Marine Corps Gen. Vincent R. Stewart in an interview with National Defense Magazine, “we have got to create space for young men and women who have great ideas to be innovative, to be disruptive, to challenge the conventional order, conventional wisdom and do things we have never even thought was possible.” If the Pentagon does not change their ways, they will lose the innovative minds behind artificial intelligence to Silicon Valley, which, ironically is dripping with Chinese investments. Conversely, China does not have the issue of separation between the public and private sectors. According to the New York Times, “Baidu — often called the Google of China and a pioneer in artificial-intelligence-related fields, like speech recognition — this year opened a joint company-government laboratory partly run by academics who once worked on research into Chinese military robots.” With that being said, the Chinese government’s top-down approach of leading that stifles information sharing and limits on ownership of innovative findings may end up hurting the country’s advancement in this field as well.

From an economic perspective, artificial intelligence is getting a small bump in funding with the Trump Administration as opposed to previous years, but will it be enough? According to the Department of Defense, “the FY 2018 President’s Budget Request for S&T is $13.2 billion, which is 2.3 percent of the Department’s ($574.5 billion) base budget. The FY 2018 request is 5.6 percent more than the FY 2017 requested amount of $12.5 billion for continued S&T focus on innovations to sustain and advance DoD’s military dominance for the 21st century.” While the overall defense budget is taking a hit, this small subsidy could mean the difference between China and the United States leading the world into the future of warfare. With China nipping at the heels of America’s military and economic superiority, many think this boost is enough to sustain dominance. In contradiction to that, The New York Times reported, “the Defense Department found that Chinese money has been pouring into American artificial intelligence companies — some of the same ones it had been looking to for future weapons systems.” These investments could mean China is beating the United States to the punch on its home turf. Again, China’s focus on artificial intelligence has yet to yield success, but it will be interesting to follow in the next five or so years to see if power has shifted.

In conclusion, artificial intelligence being implemented in the military will have economic effects both at the domestic and international level. Col. George Haynes closed the interview with, “artificial intelligence is beneficial for the military economically because it allows us to be able to make agile and quick decisions and can provide an advantage to the organization, but unless it is based upon seconds or milliseconds, there will be a strong debate whether artificial intelligence will be able to overcome other collateral and synergistic technologies.” The military needs to evolve with time in order to keep up with international and domestic threats. The economic effects of this evolution are a necessary price to pay in order to be well-equipped to integrate artificial intelligence, also known as the third revolution in warfare behind gunpowder and nuclear weapons. If the United States does progress in this realm, other countries, including China, will.