The End of the American Century? The Economic Consequences of the Vietnam War

Friday, January 7, 2011: 2:50 PM
Room 102 (Hynes Convention Center)
Robert Buzzanco , University of Houston, Houston, TX
One of the lesser-known but more critical aspects of the Vietnam War was the impact it had on the economy, and hence American hegemony in the 1960s and 1970s.  The United States entered Vietnam as the clear global leader in finance, trade, production and wealth.  Within a decade, existing structural problems erupted due to the enormous commitment to Vietnam, and the postwar Pax Americana began to fade.
            In particular, a growing balance-of-payments deficit, and consequently a major outflow of gold to the central banks of other countries created an economic crisis in late 1967 and early 1968 the President Lyndon Johnson and others compared to the 1929 economic crash.
            And Vietnam was a huge cause of these problems, as officials such as Federal Reserve Chair William McChesney Martin and Treasury Secretary Henry Fowler understood.  They  feared the economic consequences of a big war before any major commitment to Vietnam.  So, with the deployment of hundreds of thousands of troops and massive aid to the invented government in southern Vietnam, Martin would lament that “the chickens have come home to roost” on America’s Military Keynesian (or “guns and butter”) approach to economic doctrine. 
            In 1968, American hegemony took a huge hit as European politicians and bankers began to complain that, because they could not revalue their currencies, they were subsidizing American inflation and thus paying for much of the Vietnam War.  So they began to cash in their dollars wholesale for gold, leading to ever-widening deficits and a terrible run on gold in March 1968, coincidentally at the very moment that the Tet Offensive shocked the nation.  Because of this confluence of events, the grave structural limits to U.S. power stood exposed.