Many people in the Bank were worried when Lyndon Johnson announced Robert McNamara’s appointment to the Bank presidency.1 McNamara was, to say the least, a strange choice to head the organization. The former defense secretary’s role as an architect of the Vietnam War made him unpopular around the globe and demonstrated his limited understanding of at least one part of the developing world. McNamara also lacked experience in finance and development, the main components of the Bank’s work. This dual role was a product of a complex history that shaped the organization’s activities before, during, and after McNamara’s tenure.
The World Bank was conceived in early 1942, shortly after the Japanese attack on Pearl Harbor, when U.S. treasury secretary Henry Morgenthau, Jr., asked Harry Dexter White, his chief international advisor, to draw up plans for a postwar system that would prevent a repeat of the economic conditions that had led to world war. White, a committed internationalist (who was later discovered to have passed secrets to the Soviet Union during the war) responded by suggesting the creation of two intergovernmental organizations. The first would bail out countries experiencing balance of payments difficulties and coordinate international monetary activity, thereby preventing a repeat of the currency wars of the 1930s. This organization would become the International Monetary Fund (IMF). The second organization would, in White’s words, “supply the huge volume of capital that will be needed virtually throughout the world for reconstruction, for relief, and for economic recovery.”2 This would become the International Bank for Reconstruction and Development (IBRD), or World Bank for short.
White’s ideas found favor in Washington, and over the next two years he led a team of U.S. officials in refining the plans. The proposal for the World Bank almost never got off the ground, however. While the Allies were interested in the international stabilization fund, the proposal for the Bank drew little attention. When preparations for an international conference to discuss the plans began in earnest in 1944, so few nations had shown interest in the Bank that U.S. officials feared the organization might never come into existence.3
The inattention that greeted the proposal for the Bank was due in part to the organization’s limited mandate. Although White envisioned a broad role for the Bank as a coordinator of postwar relief efforts, other administration officials believed this would engender opposition in Congress.4 Thus, the plan for the Bank that the United States circulated to other governments outlined a limited role for the organization. With start-up capital provided by member countries, the Bank would raise money through the sale of its bonds and use these funds to make long-term, low-interest loans to governments for specific development projects. In so doing, the organization would help restore international lending, which had collapsed in the interwar period. As Morgenthau noted in 1943, “the primary aim of such an agency should be to encourage private capital to go abroad for productive investment by sharing the risks of private investors in large ventures.”5 The Allies were also disinterested because the Bank would privilege U.S. interests. Although any country could be a member, voting power would depend on how much money a country provided. In practice, this meant that the United States, the only nation capable of making a significant contribution, would control the Bank.6
John Maynard Keynes, the famed British economist, was particularly lukewarm about the proposal. Like White, Keynes viewed expanded international trade, the stabilization of exchange rates, and the revival of foreign investment as necessary conditions for peace. However, he was worried about U.S. dominance of the world economy and argued against the proposals. Rather than have the dollar serve as the world’s reserve currency, Keynes suggested the creation of a new international currency to prevent large trade imbalances.7 Though he supported an organization for postwar reconstruction, he also disagreed with the specifics of the Bank, particularly the idea that countries whose resources had been drained by the war, including the United Kingdom, contribute to its funding.8
Nevertheless, Keynes recognized the reality of U.S. power and, once it became clear that the United States would insist on seeing its plans through, dropped his resistance.9 He acceded to the U.S. proposals onboard the streamliner that carried European delegations across the Atlantic to the United Nations Monetary and Financial Conference in Bretton Woods, New Hampshire, in the summer of 1944.10 Even then, the Bank’s fate remained uncertain. Although delegates to preparatory meetings in Atlantic City, New Jersey, managed to come up with a general outline for the Bank, delegates made no mention of the organization during the first week of the conference at Bretton Woods. Officials only agreed to take time form the monetary deliberations to discuss the Bank at the insistence of a handful of representatives from Latin America and Europe, who were interested in obtaining low-interest loans for their countries.11
The ensuing negotiations resulted in an organization fairly similar to the initial U.S. proposal. The Bank’s founders wanted to avoid the reckless foreign lending of the 1920s and sought to ensure that the organization operate conservatively. Accordingly, the Bank’s Articles of Agreement mandated that funds would finance only clearly defined projects, rather than be provided directly to governments to use as they pleased. The Articles also required that the value of the Bank’s liabilities remain less than its reserves, that it would lend to central governments only if no alternative sources of capital were available on reasonable terms, and that countries that wanted to join the Bank would have to become members of the IMF, which would have the power to monitor their economic affairs.12
Wartime conditions further constrained the Bank’s structure. European countries convinced the United States to limit the amount of money governments would contribute directly to the organization. Instead of the U.S. plan, which called for governments to contribute at least 20 percent of the total amount of the Bank’s funding, with that percentage increasing over time, the Articles capped direct contributions at 20 percent. The remainder was to take the form of assurances from national governments that could be used as collateral for the Bank’s borrowing. The agreement to accept this level of callable as opposed to paid-in capital meant that the organization would have less money on hand and that demand for its bonds would be lower.13
The United States was, however, able to ensure that it would control the Bank. The capital contributions of member countries determined voting power, which meant that the United States would wield the most power within the organization. To assuage the Soviet Union’s concern that the Bank would serve as an instrument of U.S. foreign policy, the Articles prohibited the Bank and its officers from interfering in the “political affairs” of the organization’s members and from taking the “political character” of countries into account when making lending decisions.14
The delegates at Bretton Woods could not help but marvel at their strange creation. Keynes, who presided over the negotiations, noted that the restrictions on the Bank’s lending meant that it would operate like a fund, while the IMF would be more like a bank.15 Although the Bank’s Articles allowed for nonproject loans in special circumstances, neither the conditions for nor the content of these activities were clear. In addition, while the Bank was to operate only on the basis of economic considerations, nobody was sure how it would remain apolitical. The relationship between the Bank’s president, staff, and representatives of its member countries was also undetermined. The peculiarity of the Bank so struck Georges Theunis, a member of the Belgian delegation, that he later observed, “It was accidentally born with the name Bank, and Bank it remains, mainly because no satisfactory name could be found in the dictionary for this unprecedented institution.”16
The Bank’s founders were correct in emphasizing the organization’s uniqueness. Never before had so many governments pledged to pool their resources to promote reconstruction and development. Indeed, until Bretton Woods, international organizations had concerned themselves primarily with political, rather than economic, issues.17 Despite its limitations, the Bank thus represented an unparalleled experiment in global governance.
To be sure, there was some precedent for the Bank. The idea of a public international development bank had been around since the nineteenth century, and calls for a multilateral investment agency circulated in the interwar period.18 In the years before Bretton Woods, the United States had also sought to institutionalize international economic cooperation. In 1930, U.S. officials and private bankers spearheaded the creation of the Bank for International Settlements (BIS) to manage the repayment of World War I debts.19 And the following decade, the U.S. government attempted to establish an organization that would serve as a lender-of-last resort, guarantor and supplier of investment capital, and coordinator of monetary policy for nations in the Western hemisphere.20 These efforts not only demonstrated the U.S. government’s reliance on public-private cooperation but also formed part of a longer American tradition of promoting the global expansion of capitalism.21
While the creation of the Bank marked the culmination of certain long-term trends, it also represented a break from tradition. In order to counter the tendency of nation-states to compete against each other, the postwar planners sought to institutionalize multilateral decision-making. The shared experiences of depression and war, as well as memories of the failed World War I peace agreement, created unique conditions for this ambitious endeavor, and U.S. leadership ensured that these plans were realized. The Roosevelt administration recognized that World War II presented an opportunity to transform the international system in much the same way that the Great Depression had enabled it to recast domestic policy. Indeed, the principle that animated the New Deal—that government could productively intervene in the economy—drove the proceedings at Bretton Woods. As Roosevelt put it in describing the plans for the IMF and World Bank, the postwar order would bring about “expanded production, employment, exchange and consumption—in other words, more goods produced, more jobs, more trade and a higher standard of living for us all.”22 In this respect, Bretton Woods formed part of an unprecedented U.S.-led effort to promote global peace and prosperity through international organizations, which the historian Elizabeth Borgwardt has termed a “new deal for the world.”23
One of the most significant aspects of the postwar order was the way it crystallized understandings of the proper relationship between the public and private sectors. Although they disagreed on the specific form the system should take, the postwar planners believed in the need to strengthen economic ties between countries and, at the same time, improve conditions within them. This was no easy task: the breakdown of the world economy in the interwar period had shown how difficult it was to maintain both an open global economy and robust welfare states. The postwar planners thus faced a dilemma: how to reconstitute international trade and investment while ensuring that countries remained protected from the vicissitudes of the world market. What emerged was a shared understanding that governments should be free to maintain domestic policy autonomy while integrating into the international economy on their own terms, a process of managed globalization that political scientist John Ruggie has termed “embedded liberalism.”24 The faith in government’s ability to control economic forces informed the creation of the Bank. As much as they viewed the revival of global capital as vital to the postwar recovery, the postwar planners understood the need for public oversight of the private market. Viewed through this lens, the constraints on the Bank’s lending operations reflected a keen understanding of the perils of unregulated finance.25
Despite the consensus that globalization needed to be managed, international cooperation remained elusive following Bretton Woods. The Soviet Union rejected the agreement after failing to secure a reconstruction loan from the United States. The UK also balked at signing on to the plans in the hopes that it could convince the United States to ease the terms of postwar aid. Support for Bretton Woods was uncertain even in the United States, where the Roosevelt administration struggled to convince Congress to accede to the proposals.26
The delay in ratification delayed the Bank’s opening to 1946.27 That March, the inaugural meeting of the Bank and IMF’s Board of Governors, which consisted of the finance ministers of the organizations’ member countries, took place in Savannah, Georgia. At this meeting, officials decided to place the headquarters of the two institutions in Washington, D.C. The Bank commenced operations a few months later and the following year approved its first loan of $250 million to the government of France for postwar reconstruction. Over the subsequent months, the Bank made other reconstruction loans to the governments of the Netherlands, Denmark, and Luxembourg.28
Although they formed a brief chapter in the organization’s history, the Bank’s postwar reconstruction loans were significant for a few reasons. For one, as the primary supplier of capital to Western Europe in the immediate aftermath of the war, the Bank played an important role in meeting the region’s financial needs before the onset of the Marshall Plan.29 More important as far as the Bank is concerned, the loans highlighted a recurring tension between “program” and “project” lending. Upon receiving requests for postwar aid, a struggle broke out in the Bank over the precise form that this assistance should take. The Bank’s economists argued in favor of loans that would provide general budgetary support, program loans, while the Bank’s bankers and lawyers thought that funds should be earmarked for specific projects, as directed by the Bank’s Articles of Agreement.30 The Bank’s economists felt that the organization’s resources would be better utilized through program loans, both because these gave borrowing governments greater flexibility and because project financing would, since money is fungible, simply supplement borrowers’ budgets. The Bank’s bankers and lawyers, on the other hand, favored project lending because they thought such loans would provide a better means of ensuring that the Bank was repaid, which was important given the organization’s need to establish its creditworthiness in the eyes of private investors.31 The Bank’s economists carried the day, in part because postwar conditions necessitated fast-disbursing budgetary support loans, but the tension between program and project lending would persist throughout the organization’s history.32
The Bank’s reconstruction loans further demonstrated the extent of U.S. influence over the organization. Just weeks before the Bank opened, Harry Truman announced that the United States would begin providing financial assistance to the noncommunist governments of Greece and Turkey. If the Soviet refusal to sign on to Bretton Woods had not already done so, the Truman Doctrine put the final nail in the coffin of the international cooperation hopefully envisioned by postwar planners. The onset of the Cold War had immediate ramifications for the Bank. U.S. officials pressured the organization’s management to increase the volume and speed the disbursement of its reconstruction loans as a way to bolster the noncommunist governments of Western Europe. Shortly thereafter, the Bank acceded to U.S. demands by rejecting loan applications from the communist governments of Poland and Czechoslovakia.33
The United States exerted its greatest influence on the World Bank when it decided to bypass the organization and create the European Recovery Program in the summer of 1947. As the U.S. government’s preferred means of facilitating postwar reconstruction, the Marshall Plan displaced the Bank in Western Europe. As a result, the organization turned to development. It made its first loan to a “less developed” country in 1948, a $13.5 million loan to the government of Chile for the construction of hydroelectric dams. The following year, it dispatched a team of economists and industrial and agricultural experts to Colombia on its first major “country mission.”34
“Development” had a strange history at the Bank. Interestingly, Harry Dexter White had not included the term in his initial proposal for the Bank. Instead, one of White’s assistants appended it to the Bank’s official title shortly before presenting the original plan to the Allies in 1943. White appears to have been unconcerned by the addition. Although he was focused mainly on postwar reconstruction, he had no objections to the proposed Bank lending for other reasons. Indeed, by giving the Bank a mandate beyond reconstruction, “development” provided a broader basis upon which the organization could encourage the revival of global capital flows.35
That White disregarded “development” in initial plans for the Bank was partially due to the meaning of the term at the time. To mid-century officials, development was synonymous with industrialization. Accordingly, promoting development meant providing resources to capital-scarce countries, the same activity the Bank would undertake with respect to postwar reconstruction. This made geography the characteristic that distinguished development from reconstruction—the former focused primarily on Latin America, the latter mainly on Europe—and led to some tension at Bretton Woods. While delegates from Europe and the United States were concerned with the Bank’s reconstruction work, Latin American countries sought to place development at the forefront of the organization’s agenda. The result was a compromise in which both roles featured equally. Accordingly, Article I of the Bank’s charter reads, the Bank’s mission is to “assist in the reconstruction and development of territories of members.”36
Even so, it was clear that development would eventually surpass reconstruction as the Bank’s primary focus. As Keynes predicted in his opening address to the Bretton Woods conference:
The field of reconstruction from the consequences of war will mainly occupy the proposed Bank in its early days. But, as soon as possible, and with increasing emphasis as time goes on, there is a second primary duty laid upon it, namely to develop the resources and productive capacity of the world, with special attention to the less developed countries.37
What Keynes did not appreciate was that the number of less developed countries would increase significantly over the coming years—and how intertwined were development and colonialism. The interwar period had witnessed not only the emergence of the United States as the world’s main economic power but also a dramatic change in colonial relations. During this time, European nations began to rely on a new form of interventionism to preserve their increasingly tenuous grip on their colonies. Whereas colonial powers had long focused on extracting the maximum amount of resources from their territories, in the 1930s they embarked on programs designed to improve the living standards of their colonial subjects as a means to quell nascent anticolonial movements.38 In so doing, they pioneered the practice of international development.39
The dawning of the development age had mixed implications for the Bank. On one hand, the organization benefited from the support that countries were giving to development. The Bank drew much of its initial staff from the former colonial bureaus of Europe and partnered with Western countries’ foreign aid agencies in financing various development projects. On the other hand, the Bank played a decidedly secondary role in the nascent field of development. During the organization’s first decades, its lending remained significantly smaller and less attractive than grants and other concessional forms of assistance provided by Western nations. In addition, because the Bank could only lend to central governments, it was unable to operate in regions that remained under colonial control.40
The Bank was further constrained by its reliance on private funding. Because it raised most of its capital by selling its bonds on the private market, the Bank’s overriding priority during its initial years was to establish its creditworthiness.41 This was a main reason why, after issuing program loans to European governments for postwar reconstruction, the Bank focused almost exclusively on project lending. Beginning in the late 1940s, the vast majority of its funds went toward financing the construction of power and transportation infrastructure. Building dams, power plants, ports, and highways provided measurable rates of return that ensured borrowing governments could repay the Bank.42 The Bank’s internal dynamics reflected this change, as the proportion of engineers to economists in the organization increased in the 1950s.43
Despite its slow start, the Bank expanded significantly in the 1950s and 1960s. On the borrowing side, in 1959 IBRD bonds received a AAA credit rating, and shortly thereafter the Bank started to raise funds in Western Europe.44 With respect to lending, the Bank stimulated demand for its loans by marketing them to borrowers and helping to establish planning agencies in developing countries.45 Bank operations increased significantly as a result. Whereas in 1948, the Bank’s Board approved five loans totaling $24 million, in 1961 it made 49 loans totaling $878 million.46
The Bank’s structure expanded accordingly. In 1955, it established the Economic Development Institute (EDI), a program that brought developing country officials to the organization’s headquarters for training in economic policy. A year later, member countries founded the International Finance Corporation (IFC) as an affiliate body to make equity investments in private enterprises in developing countries.47 And in 1960, it created the International Development Association (IDA), which raised funds from governments and provided long-term, low-interest loans, “credits,” to nations too poor to qualify for IBRD loans.48
IDA enabled the Bank to broaden its geographical focus and, because its charter stipulated that credits go toward “specific projects of high developmental priority,” expand its lending criteria beyond solely financial considerations.49 In this way, IDA marked the Bank’s full-fledged entry into development. Yet IDA had its limits. A U.S. initiative meant to undercut developing country efforts to create a concessional lending affiliate in the United Nations, whose one country-one vote principle would ensure that they had a greater voice, the creation of IDA demonstrated how the U.S. government continued to view the Bank as a foreign policy instrument.50 The United States and its allies also designed IDA to be weak. Unlike the IBRD, IDA did not have the power to borrow on the private market or, like the IFC, profit from its investments. Instead, it obtained funds from triennial contributions from member countries, meaning that its survival depended on patronage from wealthy nations.
Although external forces defined the parameters in which the Bank evolved, its development was also contingent on the preferences of its management. Aside from IDA, the Bank was not dependent on regular government contributions. As a result, the Bank’s management exercised considerable sway over the organization.51 At the top of this hierarchy sat the World Bank president, appointed to five-year terms by the U.S. government pursuant to an informal agreement between the United States and Western European nations. The power of the Bank president was a legacy of John J. McCloy, the Bank’s second president. A prominent Washington lawyer who would go on to head the Central Intelligence Agency, McCloy assumed the Bank presidency in March 1947 after the brief tenure of Eugene Meyer, former chairman of the U.S. Federal Reserve and publisher of the Washington Post. As a condition for accepting the post, McCloy demanded that the power of the Bank’s Board of Executive Directors, the representatives of the organization’s member-states who formally approved loans, be curbed. To this end, he ensured that the Bank’s president—not the representatives of its member-countries—had full authority over staffing decisions and borrowing and lending negotiations.52
Eugene Black, a former executive at Chase National Bank who took over from McCloy in 1949, used these powers to guide the Bank’s maturation during his fourteen years as president. Black focused the Bank’s operations on funding projects with a high rate of return. This increased the Bank’s creditworthiness, which enabled it to expand its borrowing and lending operations.53 Black also recognized that the Bank could, because of its relative independence from governments, play a role as an international arbitrator. Accordingly, during his tenure the organization mediated a dispute between the governments of India and Pakistan over rights to water from the Indus River. He also tried to use the organization as a vehicle to settle claims arising from the Egyptian government’s nationalization of the Suez Canal.54
George Woods, who succeeded Black in 1963, put a different stamp on the Bank. Like Black, Woods, came to the Bank from Wall Street. But while Black had sought to limit Bank funding to large infrastructure projects in creditworthy nations, Woods directed more resources to governments in Africa and Asia and for education and agriculture projects. Woods also increased the role of economists in the Bank and established ties with other international organizations.55 Woods’s expansionary efforts came at a cost. The Bank struggled to sell its bonds and briefly stopped lending in the mid-1960s.56 The organization also damaged its relationship with its largest borrower when it pressured the government of India to devalue the rupee and lift import controls.57 By the time Robert McNamara succeeded Woods in 1968, the Bank’s role as a development financier was in some doubt.
Even before he stepped foot in the World Bank, Robert McNamara was one of the most important figures in modern history. McNamara spent the seven years before coming to the Bank as a highly influential U.S. secretary of defense. In the words of Pentagon historians, he “put his mark on the Department of Defense with deeper impression than any secretary in the twentieth century before or after him.”58 McNamara’s legacy was wide-ranging. Among other things, he instituted budgeting systems that continue to shape Department planning and reorganized the agency’s intelligence efforts. Yet McNamara remains best known as one of the primary architects of the U.S. war in Vietnam. His role in the conflict—including his efforts to hide details about it from the public and his long-term struggle to come to grips with it—has long defined him in popular memory.59
Before Vietnam, McNamara’s life was characterized by ambition and achievement. Born on June 9, 1916, in San Francisco, California, he made his way from a middle-class upbringing in Oakland, California, to the University of California at Berkeley, where he studied economics, participated in student government, and met his wife Margaret.60 After college, he enrolled in the Harvard Business School. While there, he was captivated by a branch of management variously termed statistical accounting, financial control, management control, and control accounting. This approach attempted to improve the efficiency of businesses through numerical analysis: first by collecting facts about a company’s operations, then by quantifying this data, and finally by using this information to allocate resources across the firm. Du Pont and General Motors pioneered the practice in the first decades of the twentieth century, and by the time McNamara arrived at Harvard in 1937 it was beginning to be deployed across a range of industries.
Using statistics to manage large organizations fascinated McNamara, who had developed a love of numbers in high school. The prospect of being able to impose order on the world in this way also meshed with his desire to exert control over himself and his environment. Since he was young, McNamara had sought to structure his affairs a highly ordered way. In seeking to distinguish himself in school, for instance, he carefully planned his academic and social calendars with the goal of outworking his colleagues.61 McNamara was also drawn to scientific management because it promised a path to professional achievement. For most of McNamara’s youth, the U.S. was mired in the Great Depression. The idea that effective management could increase a business’s profitability and, in so doing, save the economy attracted him. He distinguished himself at Harvard and joined the business school faculty after graduation.62
McNamara’s teaching career did not last long. During World War II, the military enlisted him to teach Army Air Force officers how to apply statistics to war planning. The analyses proved so important that McNamara soon found himself traveling to Allied bases in Europe and Asia to conduct the research himself. McNamara threw himself into this work. He spent long hours examining flight patterns, helped develop a system for the Air Force’s internal reviews, and made a name for himself when he brought to the attention of his superiors an ineffective plan to arm Chinese forces by way of India. In 1944, McNamara found himself advising General Curtis LeMay on Allied operations in the Pacific, including the devastating fire-bombing of Japan.63
After the war, McNamara and nine other Army Air Force officers, nicknamed the “Whiz Kids,” landed jobs at the Ford Motor Company. The legendary carmaker had been losing ground to General Motors and Chrysler since the 1920s and was then in a state of crisis. Henry Ford, the founder, was in his eighties. Edsel, his son and designated successor, had passed away. And Henry II, Edsel’s son and the new president of the company, had spent most of the previous years in the military. Although government contracts boosted Ford’s profits during World War II, by 1945 it was on its last legs. “The company was not only dying,” remembered a former executive, “it was already dead.”64
McNamara was placed in Ford’s finance department. No sooner had he set about straightening the company’s books than he discovered that practically nothing had been subject to strict oversight. Balance sheets were determined by weighing stacks of invoices and receipts, and no one knew precisely what it cost to build a car. Frustrated by the disorder but confident in his methods, McNamara developed an accounting system for the company and helped decentralize Ford’s operations along the lines adopted by General Motors in the previous years.65
McNamara came to embody scientific management during this time. His earnest demeanor took physical form when he traded his Harvard tweed and Air Force blue for the charcoal gray suits of Detroit. He strode around Ford headquarters with account book and pencil in hand, hair slicked back and eyes poring over numbers from behind wire-rimmed glasses. He was often the first to arrive and the last to leave, and he developed a knack for impressing his superiors with his grasp of statistics. As other Whiz Kids departed, McNamara rose up the ranks, and in 1960 Henry II named him president of the company. McNamara, just forty-four at the time, was the first president to come from outside the Ford family.66
His time in the automobile industry would soon come to an end, however. Less than a month after being appointed president of Ford, Robert Lovett, President Truman’s secretary of defense and one of McNamara’s superiors during World War II, recommended McNamara as a potential cabinet member to president-elect John F. Kennedy. Kennedy was eager to have a businessman in his cabinet and asked McNamara to be his secretary of the treasury. McNamara declined, reportedly saying he would have more power over the U.S. economy at Ford, but accepted Kennedy’s counteroffer to become defense secretary.67
Kennedy charged McNamara with the formidable task of bringing the U.S. Department of Defense, a sprawling complex of agencies that operated with little civilian oversight, under centralized control.68 Despite his lack of political experience, McNamara was able to make significant progress toward this goal. He surrounded himself with energetic staffers and used a version of control accounting known as planning, programming, and budgeting to increase his power over the institution. In the process, McNamara made quantitative analysis a more important part of Pentagon operations and shifted authority from the generals to the civilian leadership.69
McNamara’s administration of the Pentagon won him few friends among the military brass but many admirers elsewhere. He became one of Kennedy’s most trusted cabinet officials, earned the respect of members of Congress for his methodical responses to their questions, and awed journalists with his ability to synthesize vast amounts of data. Before long, people began to view McNamara as a human computer who, through intelligence and hard work, brought about significant improvements in government.70
There was some truth to this image. McNamara was a bright and devoted public servant, and his leadership of the Pentagon demonstrated the applicability of modern management to public administration. Nevertheless, this picture belied a more complex reality. At the same time that he was transforming the Department of Defense, McNamara was advising the president on U.S. foreign policy. His strategic vision was wanting. He encouraged Kennedy to undertake the failed Bay of Pigs invasion in April 1961 and, during the Cuban Missile Crisis that October, initially supported a naval blockade, only to backpedal and argue for an air strike against Cuba.71 In both cases, McNamara showed himself to be a firm believer in the use of military power, something he and others in the Kennedy administration believed should play a greater role in U.S. foreign policy.72
Nowhere was this more evident than in the administration’s stance toward Vietnam, a focus of U.S. interest ever since it began a protracted war of independence against the French colonial government in the 1940s. In the early 1960s Kennedy expanded U.S. efforts to assist the government of South Vietnam in its war against the communist North. Within a year of taking office, he dispatched U.S. military advisors to South Vietnam and created a formal military command for the country.73 Although Kennedy resisted calls to send U.S. ground forces to the country, the U.S. commitment increased significantly under his watch. By the end of 1963, there were over 16,000 U.S. military personnel in South Vietnam.74
Having exerted greater control over the Pentagon and solidified his influence in Kennedy’s cabinet, McNamara played a key role in formulating U.S. policy toward Vietnam. In 1961, he and secretary of state Dean Rusk urged Kennedy to deploy forces to the region.75 McNamara’s influence increased after Kennedy’s assassination in 1963. Lyndon Johnson inherited Kennedy’s foreign policy team, and McNamara soon emerged as one of the new president’s chief advisors. McNamara continued to advocate strengthening the U.S. commitment to South Vietnam. In 1964, after he informed Johnson that the North Vietnamese had attacked U.S. warships in the Gulf of Tonkin (a report that turned out to be false), Johnson obtained Congress’s permission to expand the war.76 In 1965, the United States began bombing North Vietnam, and Johnson followed McNamara’s advice in deploying 50,000 troops to South Vietnam.77
True to form, McNamara used quantitative analysis to manage the war. Yet techniques that had previously served him well failed in Vietnam. Indicators that the Pentagon used to determine the progress of the war provided an incomplete picture of conditions on the ground and led U.S. policymakers to deploy ever-greater commitments of troops and materiel. Evidence of the folly of McNamara’s management of the war, such as his determination of North Vietnamese capabilities through estimates of enemy body counts, soon became notorious. His bureaucratic mindset also prevented him from absorbing information that came from outside the chain of command or that contravened the official line, problems that contributed to the U.S. military’s failure to achieve its objectives despite its continued escalation of the conflict.78
The aura that had surrounded McNamara soon began to fade, and domestic and international criticism mounted. In 1965, an antiwar activist immolated himself outside McNamara’s Pentagon window. His public appearances soon became sites of protest. His congressional testimonies turned combative. And his press briefings became exercises in statistical doublethink. Even to his dwindling group of supporters, the man who had come to Washington to exert rationality and control over the U.S. defense establishment had become indistinguishable from the war he was mismanaging.79
It was understandable, then, that most people expected to hear about Vietnam when McNamara delivered a speech to the American Association of Newspaper Editors in Montreal in 1966. Surprisingly, he did not mention the war once. Instead, McNamara used the occasion to draw attention to what he claimed was a broader and far more significant set of issues. If one examined patterns of armed conflict around the world, he declared, three facts jumped out. One, most instances of organized violence were civil wars. Two, almost all these conflicts took place in developing countries. Three, their intensity and frequency were increasing. Far from being isolated, distant events, McNamara argued, these conflicts posed a direct threat to the United States. As he put it, “violence anywhere in a taut world threatens the security and stability of nations half a globe away.” In order to deal more effectively with these challenges, McNamara argued that the definition of national security had to change. Peace could not be purchased through “military hardware,” “military force,” or “military activity.” Rather, Western nations needed to eliminate potential sources of conflict by improving the “standards of living” for people in developing countries. “The essence of security,” McNamara concluded, “means development.”80
The audience was shocked. Although many knew McNamara to be a supporter of the U.S. foreign aid program, his rejection of military force as the central component of national security ran counter to U.S. policy in Vietnam. Journalist James Reston, who had accused McNamara in print of lying about the war, gushed that the defense secretary had reached “beyond the draft, beyond the Pentagon, beyond administration policy, beyond the present, even beyond the concept of sovereign nation states, and certainly beyond Vietnam” in search for a “unifying principle” to govern international relations.81 To some, McNamara’s words confirmed that, despite his reputation, the defense chief was a humanitarian. The speech had revealed “the real Robert McNamara,” a columnist wrote, “lofty and far ranging and liberal beyond any dogmas.”82 As Reston put it, McNamara “is a philosophical computer, and the philosopher in him is stronger than the computer.”83
McNamara’s words reflected many of his core beliefs. Like many who came of age during the Great Depression, he had witnessed poverty and unemployment firsthand, and he believed that without government intervention such conditions would have led to significant social and political unrest. “Had President Roosevelt not done some of the things he did,” McNamara later told the filmmaker Errol Morris, referring to the New Deal, conditions “could have become far more violent.”84 McNamara’s faith in the ability to solve seemingly intractable problems like poverty also reflected his managerial background, which led him to view organizations of varying complexity, whether a business, government agency, or entire country, as entities that could be controlled with modern management techniques. As he famously put it during his time at the Pentagon, “management is the gate through which social, political, economic, technological change, indeed change in every dimension, is rationally spread through society.”85
McNamara also had strong missionary tendencies. As a young man, he once remarked to a friend that his life’s goal would be to “help the largest number,” and he viewed his efforts to reform the organizations he led as emblematic of an abiding desire to serve the public good. Long after he left Ford, for example, McNamara boasted of how he had been the first automobile executive to try to institute safety features in cars. (He neglected to mention that he dropped these plans when pressured by his fellow executives.) And as secretary of defense he had tried to promote progress in domestic race relations by creating a program entitled “Project 100,000” that lowered the educational standards for military induction. McNamara billed this as a means to assist poor youth to achieve a better future while downplaying the fact that it increased the number of minorities deployed to Vietnam.86 Even McNamara’s initial support for the war meshed with his humanistic proclivities. Like many others, McNamara saw U.S. intervention not simply as a means to contain communism but as an opportunity to promote the economic, social, and political progress of a postcolonial nation.87
McNamara’s speech also reflected basic principles of U.S. foreign policy. The notion that the economic development of poor countries was vital to U.S. security had been part of the country’s strategic thinking since 1949, when President Truman established the U.S. foreign aid program.88 Although the stated purpose was to promote “the improvement and growth of underdeveloped areas,” officials intended foreign aid as means of ensuring a successful resolution of the Cold War.89 Development became even more of a strategic priority in the 1960s. Worried that newly independent countries would turn toward the Soviet Union and convinced that poverty bred political instability, President Kennedy declared the 1960s the “Decade of Development,” requested large increases in U.S. foreign aid levels, and created the U.S. Agency for International Development (USAID) to manage the country’s foreign assistance programs.90
Both the U.S. military intervention in Vietnam and the U.S. foreign aid program were predicated on a belief in the ability of U.S. officials to control events in the developing world. Consequently, failure in Vietnam undermined the popularity of foreign aid.91 Although it would take some time for this to become clear, McNamara had an idea what was coming. At the time he delivered his speech in Montreal, he had come to doubt the possibility of a U.S. victory. In early 1965, months before encouraging Johnson to make the fateful decision to commit ground troops, he began to suspect the war could not be won. By the following summer, he had grown concerned that further escalation would damage other U.S. foreign policy objectives.92 As the war intensified, McNamara’s suspicions were confirmed. Soon he was presiding over a war he knew was unwinnable.93
McNamara’s sense of loyalty prevented him from directly confronting Johnson or resigning. Nevertheless, his concerns continued to grow. In May 1967, he made his reservations known by calling for a restriction on U.S. bombings and a limit on future commitments of ground forces.94 As he told the president, “the picture of the world’s greatest superpower killing or seriously injuring 1,000 non-combatants a week, while trying to pound a tiny, backward nation into submission, is not a pretty one.”95
McNamara’s position angered Johnson. Discontent over the war had made the president intolerant of dissent within his inner circle. The fact that McNamara, of all people, was questioning U.S. strategy was particularly irritating.96 The apostasy of his once-hawkish secretary of defense so exasperated Johnson that he complained to a senator that McNamara had “gone dovish on me.”97
Relations between Johnson and McNamara continued to deteriorate over the coming months. As the president struggled with his own doubts about Vietnam, McNamara insisted privately that the war needed to be wound down. Yet even as he encouraged Johnson to deescalate, he continued to maintain in public that the United States and South Vietnam were winning.98 These lies took their toll. McNamara grew estranged from his son. His wife was hospitalized with ulcers. He began to waver in his congressional testimonies. And his behavior became erratic. Members of the administration soon started to worry about his mental state.99
A secretary of defense on the verge of a nervous breakdown was bad enough. One who was rumored to have shared his discontent over the war with Robert Kennedy, Johnson’s main rival for the upcoming Democratic nomination for the presidency, presented Johnson with an untenable situation. On one hand, Johnson understood that dissent in his cabinet not only hampered effective policymaking but also might, if it became known, doom his chances for reelection. But removing McNamara would confirm rumors of internal strife and allow critics to argue that the administration was hiding the truth about the war from the public. Even worse, relieving McNamara of his duties might cause him to criticize the war in public.100
Johnson decided to neutralize McNamara by sending him to the World Bank. In early 1967, George Woods, whose five-year term as Bank president was coming to an end, had recommended to Johnson that he take advantage of the U.S. government’s prerogative to appoint the Bank president to select McNamara as his replacement. McNamara’s “essence of security” speech had impressed Woods, who was leaving the Bank because of health issues, and he thought the defense secretary’s managerial skills would serve the Bank well.101 Woods discussed the idea with McNamara separately, and McNamara, looking for a way out of the Pentagon, mentioned the possibility to Johnson in passing.102
At first, nothing came of these discussions. McNamara’s name was not among an initial list of potential World Bank presidents circulated by the Treasury Department, which handled U.S. policy toward the Bank.103 Rather, the administration’s main goal was to find someone who had a background in finance and development, neither of which described McNamara.104
However, after McNamara broke with Johnson over the escalation of bombing in North Vietnam in November, the president rethought Woods’s suggestion. He informed Treasury Secretary Henry Fowler of his desire to appoint McNamara to the Bank presidency and on the second to last day of the month announced to nearly everyone’s surprise, including McNamara’s, that his secretary of defense would be leaving the Pentagon for the World Bank in the coming months.105
Johnson’s decision to appoint McNamara to the Bank presidency was shrewd. Because the Bank’s Articles of Agreement prevented the organization’s officers from commenting on the political affairs of member countries, McNamara would have to remain silent on Vietnam if he wanted to keep his job. Aware of this possibility, upon learning of the appointment Robert Kennedy rushed to the Pentagon and urged McNamara to decline Johnson’s offer. McNamara refused, and on November 29, immediately after the Bank’s member countries approved his appointment, told reporters he would be leaving the Department of Defense for the World Bank in the spring.106
Yet while it was politically expedient, Johnson’s relegation of McNamara to the Bank was also a craven act. That the president was willing to place McNamara, who had overseen a war that killed thousands of Vietnamese civilians, in charge of an organization tasked with promoting the development of poor countries testified to the remarkably narrow vision Johnson had for the Bank. Just as troubling was the fact that McNamara, knowing that the war was a lost cause and that his public criticism might help end it, was willing to go quietly.
Nevertheless, McNamara’s appointment seemed to hold mixed implications for the “unprecedented institution” whose headquarters were just down the street from the White House and across the river from the Pentagon. The Bank was getting an experienced manager, but one whose best days seemed far behind him.