McNamara's Other War

Retrospectives of the life of Robert McNamara have, unsurprisingly, focused on his tenure as U.S. secretary of defense during the Kennedy and Johnson administrations, particularly his role in and reaction to the American war in Vietnam. Yet a case can be made that McNamara’s most important years came after his time at the Pentagon. For thirteen years following his tearful departure from the Defense Department, McNamara continued to put his stamp on history in a subtler but no less profound manner while serving as president of the World Bank. Across the Potomac from the Pentagon McNamara went from prosecuting a war in Vietnam to trying to fight poverty around the globe. In the process he transformed the institution he led, and the world around it, in lasting- yet largely forgotten-ways.

McNamara assumed the presidency of the Bank, a family of intergovernmental organizations whose original body, the International Bank for Reconstruction and Development, was created at the Bretton Woods conference in 1944 to provide financial support for postwar reconstruction and economic development, on April 1, 1968, just weeks after leaving the Pentagon and four months after Lyndon Johnson appointed him to the post. Johnson, frustrated that his once hawkish defense secretary had started to oppose further escalation in Vietnam, had decided to move McNamara to the Bank in part because he assumed that McNamara would not make his doubts about the war public if he was put in charge of an organization which was prohibited from commenting on the political affairs of its member-states. Indeed, to most observers it seemed that McNamara's move to the Bank, whose headquarters lay just blocks from the White House but which had led an anonymous existence since its founding, would consign him to oblivion.

Events proved otherwise. Despite the tremendous personal and professional toll of Vietnam, upon assuming the presidency of the Bank McNamara recaptured the spirit of his early career. The corporate manager, institution builder, and systems analyst found in the Bank a new venue in which to prove his worth. Convinced by his experience in Vietnam that the path to international security lay in economic development rather than war, McNamara remade the Bank in his first years in office. He put an end to the organization’s long-held conservatism by expanding its borrowing and lending portfolios, staff size, and research operations. He instituted detailed planning and budgeting mechanisms into its procedures. And he had it cultivate closer ties with developing nations. At the same time, McNamara broadened the Bank’s agenda from promoting the economic growth of developing nations to alleviating poverty within them.

But  McNamara was no more able to evade history at the Bank than he had been at the Pentagon. Just as he was turning the organization into the world’s preeminent development institution, things took a turn for the worse. Intellectuals and activists on the left attacked the Bank’s technocratic and interventionist development schemes, especially its new rural development program, as well as its support of authoritarian governments from Chile to the Philippines. From the right came arguments that the Bank was a quasi-socialist institution, promoting ill-conceived, statist development efforts around the world. These criticisms fed into the growing unwillingness of the U.S. government to increase its financial support of the organization, part of the long decline in American foreign aid levels. To top it off, the tremendous expansion of private lending to the third world, accelerated by the petrodollar recycling that followed the 1973-74 oil crisis, rendered the Bank’s funds less attractive to potential borrowers.

By the end of the 1970s McNamara’s dream of eliminating world poverty had become a nightmare. Many of the Bank's new poverty-oriented projects were failing, and developing countries began to face increasingly severe balance-of-payments deficits, made all the worse after the second oil shock and the rise in U.S. interest rates in 1979. In a last gasp, McNamara had the Bank issue loans to third world nations on the condition that they liberalize their economies. Only though such "structural adjustments," McNamara now argued, could poor countries hope to achieve lasting development. Yet as was the case in Vietnam, McNamara’s strategy was better on paper than in practice. The Bank’s structural adjustment loans did little to promote growth and, in many cases, contributed to increasing rates of poverty and inequality in recipient nations, even as they accelerated ongoing processes of global economic integration.

McNamara retired from the Bank in 1981, just as the Reagan administration was beginning to view structural adjustment lending as a means to force developing nations to adopt free market policies, but he had already help lay the groundwork for what would come to be known as the “lost decade of development.” Over the course of his tenure McNamara had a hand in pushing developing countries into ever deeper debt. Although frustrated by his organization’s inability to match commercial lending to the third world, McNamara regularly encouraged private banks to lend to developing nations. At the same time, he continually drove the Bank to increase its own lending, regardless of the quality of its loans or the creditworthiness of its borrowers. In so doing, McNamara’s Bank played a part in causing the third world debt crisis of the 1980s.

Indeed, for all his strengths in turning the Bank into a first-class center of development thinking and practice, McNamara demonstrated a continual inability to grapple with the realities of the world around him. It seems to have escaped McNamara’s notice that loans, whether issued by public or private institutions, would eventually have to be repaid, that developing nations, for all of their needs, had a limited ability to utilize external capital, and that the Bank, for all of its strengths, could not continually increase both the quality and quantity of its operations. These failures were not entirely of McNamara's doing, although they did owe to the missionary spirit which characterized his presidency. Yet it was McNamara's fate to be placed at the Bank during difficult times, as was true of his tenure at the Pentagon. And as with his career as secretary of defense, if McNamara cannot be singled out for blame, he should at the very least serve a historical focal point- an agent and symbol of the dominant ideas and forces of the period.

That these events remain poorly understood is a testament to how Vietnam continues to cast a long shadow over modern American history, as well as to the fact that institutions like the Bank and issues like international development generally escape both scholarly and popular attention. This is a shame, for the mixed legacy of this story – a Bank which remains supreme in its field yet which continues to be unable to address the deep inequalities within developing nations and between rich and poor countries- lives on even after its author’s death.

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