The Economy: Pressures of Viet Nam

Chicago’s Inland Steel Co. has put 233 women on its production lines for the first time since World War II, and the Jewel Tea Co. has hired women as butchers to supplement its draft-depleted supply of manpower. Pittsburgh copper fabricators have had so much of their output pre-empted by the Pentagon that they cannot meet civilian demand for plumbing equipment. Appliance manufacturers, hoping that buyers will not notice the difference, have begun to trim a few inches off their electrical cords. Shoemakers have cut back production of cowboy boots to devote full time to combat boots. These are just a few of the many stresses, strains and changes that have been caused—or aggravated—by the Viet Nam war.

Less Than Korea? The cost of Viet Nam may seem small in relation to the overall economy: total defense spending amounts to only 8% of the gross national product, less than the average ratio during the 1950s and little more than half the Korean war peak of 14½%. Yet, unlike the Korea war, which hit when the U.S. still had plenty of production slack and more than 5% unemployment, the Viet Nam war is an added burden on a substantially full-employment, full-production economy that has been expanding for 51 years.

The combination of demands—mili tary and civilian—is pressuring a wide variety of industries. Makers of communications equipment and aircraft are being pushed to the limit. Orders for machine tools are backlogged up to 16 months. New England electronics manufacturers report delays of many weeks or months in deliveries of semiconductors, integrated circuits, capacitors and film resistors. Besides the scarcity of men and materials, manufacturers of all kinds complain of shortages of freight cars and ships to move goods.

Peace Profiteering. No industrial group has been more affected than metals. In short supply are nickel, molybdenum, vanadium and, most of all, copper. The Government has requisitioned 18% of the copper industry’s production. In steel, high-priority Government orders have compelled Allegheny Ludlum to convert its special-metals subsidiary almost entirely to defense production and to delay deliveries of alloys to civilian customers in the transportation, construction, aircraft, electricity and even nuclear-energy fields. Instead of shutting down its Christy Park Works and laying off 500 workers, as it had announced last year, U.S. Steel Corp. has the plant going full blast, with 2,000 workers turning out bomb casings and air-to-air missile warheads.

The effects are even more pronounced in aluminum, because this is a lightweight war; the Pentagon is using proportionately much more aluminum than in Korea. Washington has ordered aluminum manufacturers to “set aside” 13% of their production for defense use. The largest producer, Alcoa, estimates that defense orders will jump from 10% of the industry’s total output last year to 20% this year. At Government request, Alcoa is building an additional plant at Rockdale, Texas, and has its big extrusion presses at Lafayette, Ind., working round the clock on defense items. Civilian customers have to wait as long as one year.

Textiles are also tight. Military demand for textile goods, now more’than $1 billion yearly, has delayed deliveries of fall clothes to shops. Chinos, Dacrons and worsteds are hard to get. Almost all the industry’s “duck” cloth is going for tarps and tents. Two weeks ago the Government asked for bids for 1,000,-000 uniforms; the industry submitted bids for only half the total. Many textile men hesitate to compete for Government business, prefer selling to their old, reliable civilian customers, who are less likely to cut back orders without notice and are often willing to pay more than the Pentagon. To buck such peace profiteering, the Government has issued hundreds of thousands of “rated orders,” which force manufacturers to sell to the armed services—at the Pentagon’s price.

More Strain Than Gain. The draft, and the tendency of more and more students to stay in college to preserve their draft-free status, are heightening the already severe labor shortage. Motorola Corp. Chairman Robert Galvin last week cited the labor squeeze as a prime reason why the company’s earnings are expected to drop in this year’s second half. To recruit, some companies resort to blind mailings; Automatic Electric Co. recently sent letters to people living near its Chicago plant, asking, “Are you happy with your job?” By contrast, the Pennsylvania Power & Light Co. has more engineering job applicants than it needs—because public-utility power engineers are draft-exempt.

Despite all this, the economy is not so deeply involved in Viet Nam that industry is afraid of peace. Says President Ralph W. Rawson of Firth-Sterling Inc., a Pittsburgh manufacturer of steel for machine tools: “If the war were concluded tomorrow, I think we’d experience a 10% drop in business, but the backlog would be back where it now is within one year.” Adds Charles Ducommun, president of Ducommun Inc., a Los Angeles metal supply firm: “A peace market would be a bull market, and most businessmen would happily adjust to it.” Manufacturers commonly believe that they could quickly turn their war production lines around to serve the clamoring consumer demand, and to meet the expected rise in Government orders for domestic programs. Though the war has increased sales, the gains have been outweighed by the strains —and businessmen would like to see them disappear.