policy - The Black Vault

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aggressive military and diplomatic programs with little reference to what
turned out to be important economic limitations. Defense spending at the
height of the Vietnam War accounted for 9 percent of GNP, of which the war
itself accounted for only 3 percent. Because of the relatively small size
of this commitment it was not necessary to mobilize the economy in a manner
similar to that necessary during World War II or even the Korean War.
doing the opposite, though, and almcst completely disregarding the impact
of the war on the domestic economy--not, for example, even instituting a
significant tax to compensate for the war-relatea increase in aggregate
demand until 1968-- the Johnson Administration (with an assist from
Congress) added to the economic problems the US had to face in the late
"1960s and the 1970s. Regardless of the war and the presence or absence of
war-related economic planning, the US was going to be faced with such
problems as a diminishing international economic role (in relative, if not
absolute terms), the end to an era of cheap energy, and the trend towards
the increased production of services relative to goods.
By
To these were
added a legacy of inflation which plagues us today even more than at the
height of the Vietnam War.
Some economists even argue that we are now
faced with a situation in which "the Phillips curve has shifted to the
right," which is to say that the amount of unemployment associated with a
given leve' of inflation has increased. This is sobering news indeed for
those working towards achieving the goal of full employment (even defining
full employment as, say, 3 or 4 percent actual unemployment) at zero
inflation.
The truth of the matter is that the economic policies made necessary
by the Vietnam War were not politically viable. Either the war or the
economy had to give and, given the political commitment of successive
administrations "not to lose Vietnam," it was the economy that was sacrificed.
In retrospect this seems shortsighted, but given the structure of
the US political system it is difficult even now to see how the decision
could have been otherwise.
7 !And finally, the US economic experience during the Vietnam War years
illustrates the relationship between the domestic and international
K economy. The international monetary system established after World War II
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