I don't think that's a good analogy. Maybe an army can't make use of every type of person (doubtful, in this context) but doubly doubtful in the economy at large where employers need many different kinds of people. Moreover, who is to say the stupid and diligent, to borrow from your quote, wouldn't do worse harm at home left to their devices?

In any event, Japan, in the 80s, was pretty much near full-employment. I don't think many economists or government officials would argue that was "bad". Perhaps industrialists who could not find labor might have thought it was "bad".