Today, the words “Our Dream Is a World Free of Poverty” are carved in stone in the lobby of the World Bank’s headquarters in Washington, D.C. The phrase dates from the 1990s, when Bank management sought to develop a mission statement for the organization. The motto resonated with staff and continues to reflect the organization’s self-conception. As one longtime World Banker has written, the “antipoverty mission is almost part of the water” at the Bank.1
It was not always this way. For much of the Bank’s history, its primary focus was promoting economic growth, and it lending operations were almost exclusively limited to large infrastructure projects. Those at the Bank were not indifferent to the plight of the world’s poor. But they viewed growth as a prerequisite for poverty reduction and felt that addressing living conditions within borrowing countries was beyond the organization’s purview.
Robert McNamara changed this mentality. He believed that the Bank needed to expand its focus beyond promoting growth through infrastructure projects. He spoke openly about the importance of ensuring that Bank projects directly benefit the poor, and he pushed the organization into areas it had previously ignored, such as primary education and small farming. In the process, he elevated poverty reduction to the top of the Bank’s agenda.
McNamara was interested in broadening the Bank’s focus for a variety of reasons. His experience in Vietnam affirmed his belief in the connection between material want and political instability. His desire to leave a positive legacy attracted him to the antipoverty mission. His managerial mindset led him to view poverty reduction as an achievable objective. Frustration in the development community with growth-centric strategies further convinced him that the Bank needed to alter its approach.
McNamara waged his war on poverty on a number of fronts. He used his bully pulpit to speak about the plight of what he termed the “absolute poor.”2 He directed Bank staff to study the relationship between poverty and growth. And he had the organization fund projects aimed directly at the poor. Although this approach had its limits, in extending the Bank’s focus from the conditions of developing countries to conditions within them, McNamara brought the Bank into contact with issues it had long avoided. In so doing, he positioned the organization to play a more active role in the affairs of developing countries.
Before Robert McNamara’s arrival, the World Bank subscribed to a relatively narrow definition of development. Although Bank staff and management were aware that development entailed more than building dams and highways, during its first decades the organization steered clear of making loans for health, education, housing, and other social sectors. In part, this was out of a concern that such projects would not produce measurable returns and might thereby raise questions about the Bank’s creditworthiness. It was also a reflection of intellectual trends. Development economists in the 1950s and 1960s were concerned primarily with determining how to foster economic growth and tended to consider infrastructure investments as vital to this process. Pessimistic about developing countries’ ability to generate income through exports, they saw foreign aid as necessary to enable governments to afford these internal improvements.3
Even when the Bank began to expand its focus in the 1960s, its desire to lend only for “directly productive” projects limited its work. For instance, its early agricultural loans were geared toward large-scale, commercial farmers, and its initial education loans went toward secondary and higher education, rather than primary schools. Such operations manifested the Bank’s belief that poverty reduction was a consequence rather than a cause of growth. As McNamara’s predecessor, George Woods, declared in 1967, the Bank had “one objective: the economic growth of the Bank’s member countries.”4
Robert McNamara came to the Bank with a broader understanding of development. In his 1966 “essence of security” speech he not only argued that poverty caused political instability but also spoke of development as something that meant more than economic growth. As McNamara put it then, “development means economic, social and political progress. It means a reasonable standard of living.”5 Not surprisingly, McNamara found the Bank’s inattention to poverty unacceptable and, upon assuming the presidency, announced a shift in focus. During his inaugural address at the Bank and IMF annual meetings in September 1968, he argued that high rates of economic growth in developing countries were “cosmetics which conceal a far less cheerful picture [since] . . . much of the growth is concentrated in the industrial areas, while the peasant remains stuck in his immemorial poverty.” Given “the connection between world poverty and unstable relations among nations,” he promised that the Bank would increase its lending, channel more funds to the world’s poorest countries, and identify and eliminate the “strangleholds on development” that had prevented the benefits of economic growth from reaching the poor.”6
McNamara continued to sound these themes in his first years at the Bank. During a visit to South America, he announced that he was “concerned by the rigidity of social systems in which the mass of the people is poor, few are rich, and there is little chance for the many to move upward from poverty.”7 In 1969, he urged greater attention to problems of “structural unemployment” and “urban decay” in the developing world and declared that development should focus on “the advancement of the human condition.”8 In Ethiopia the following year, he stated that the primary goal of development should be to “create a fuller, happier, and more productive life for the people of the country.”9 As he put it in Cameroon shortly after that, “individual men and women are not only the ultimate cause of real development, but the ultimate objective as well.”10
McNamara believed that scientific and technological advances had made eliminating world poverty a real possibility. Specifically, he saw the Green Revolution, the name given to a set of improvements in agricultural technologies that significantly boosted food production in parts of Asia and Latin America in the middle decades of the twentieth century, as an example of the ways seemingly intractable social and economic problems could be solved. “There is no cause for despair,” he told Senegalese officials in 1969. “In Asia . . . I have seen the beginnings of an agricultural revolution which . . . could banish hunger from those lands in a few short years [and] . . . in my own country . . . I have witnessed the creation of a production machine which could abolish poverty from the earth by the year 2000.”11 McNamara also rejected arguments that foreign aid was money down the drain. “Can we during this decade act to assist . . . these two billion people to help themselves to reduce the conditions of misery and deprivation which affect [their] lives?” he asked a U.S. television audience in 1971. “My answer is ‘yes’ we can.” Throughout, he insisted that development was morally, economically, and strategically important. A “Marshall Plan for the world” was “not only possible but . . . necessary.” Unless rich countries became more attuned to the problems of the developing world, “there will be great political instability and there will be lesser markets for our products.”12
McNamara’s personal sensibilities and background animated his interest in poverty reduction. As noted earlier, he exhibited missionary tendencies at a young age, telling a close friend that his life’s goal was to “help the largest number.”13 He also came of age during the Great Depression. While he did not suffer directly, this experience made him aware of the devastating impacts of economic stagnation and mass unemployment. He also viewed President Franklin Roosevelt’s New Deal programs as an example of useful government intervention. As he later told filmmaker Errol Morris, “the society was on the verge of, I don’t want to say ‘revolution,’ although had President Roosevelt not done some of the things he did, it could have become far more violent.”14 And, while there is no evidence that McNamara’s guilt about his role in Vietnam led him to make poverty a centerpiece of the Bank’s work, the war did not disabuse him of his belief that underdevelopment posed a threat to political stability. After leaving the Bank, for instance, he wrote that “economic disparities among nations” was one of “the underlying causes of Third World conflict.”15
Those around McNamara reinforced his interest in expanding the Bank’s focus. His wife Margaret, a longtime advocate for domestic antipoverty programs, helped draw his attention to the plight of the world’s poor. While together on a visit to Mali, she even convinced him to drop his opposition to Bank funding of health programs and initiate a plan to eradicate river blindness, which was affecting populations in West Africa.16 McNamara also maintained ties with U.S.-based philanthropies, including by serving as a trustee of the Ford Foundation during his presidency. Members of these organizations encouraged him to put population control and poverty alleviation on the Bank’s agenda.17 In addition, McNamara often consulted the British author and foreign aid advocate Barbara Ward, whom he had met during his time in government. Ward urged McNamara to use the Bank to address global population growth, as well as education and rural development.18
Mahbub ul Haq, a Cambridge- and Yale-trained economist from Pakistan who would gain fame for spearheading the creation of the UN Human Development Report in 1990, was perhaps the most important influence on McNamara. As a senior advisor in the Bank’s Economics Department and, later, as director of the Policy, Planning, and Program Review Department, ul Haq helped convince McNamara that development should focus on raising living standards and that that poverty alleviation could be a cause, rather than a consequence, of economic growth.19 Ul Haq first came to McNamara’s attention as a vocal critic of growth-centric development strategies. While an economist in the Pakistani government in the 1960s, he had seen how development approaches that prioritized industrialization failed to result in widespread improvements in living standards, even though they led to economic growth. As he put it, “a rising growth rate is no guarantee against worsening poverty.”20 Although initially hostile to ul Haq’s critiques (ul Haq recalled that their initial encounters were “extremely unhappy ones [in which McNamara] suggested to me that this kind of belligerent questioning of growth, at a time that the World Bank was committed mostly to production projects, was totally uncalled for”), McNamara came to appreciate ul Haq’s perspective, and by the early 1970s he was incorporating ul Haq’s call to focus more attention on plight of the world’s poor into his speeches.21
Views like ul Haq’s had become increasingly common by the time McNamara arrived at the Bank. In the late 1960s, statistics collected as part of the UN’s Development Decade painted a mixed view of global development. Although many poor countries had grown impressively, the gap between developed and developing countries remained wide. Moreover, rates of poverty and inequality within many nations had not budged.22 Such findings led some economists to question the very “meaning of development.”23 In 1970, David Morse, the head of the International Labour Organization, even called for the “dethronement of GNP” as the primary indicator of national development.24 As British economist E. F. Schumacher, a leading critics of growth-centric development strategies, put it:
Development of a country—very well! But does it not have to mean above all else the development of people? Industrialization—splendid! But will the poor people be involved, and, if so, how many of them? Growth of the national income—excellent! But will it benefit the poor and enable them to develop? As we look back upon ‘development’ during the sixties—the “Development Decade”—we come to the disturbing conclusion that by and large, speaking very generally, development has gone ahead in many places but The People, the poor, the great majority, have been by passed and left out.25
Such critiques presented a significant challenge to the World Bank, which had long been one of the main institutional promoters of growth-centric development. McNamara recognized that the organization needed to shed its traditional image if it wanted to maintain its relevance. One of his main efforts in this regard was the organization of a study that would survey past development efforts and propose recommendations for the future. In the summer of 1968, McNamara convinced outgoing Canadian Prime Minister Lester Pearson to chair the report.26 Although Pearson’s team was to go about its work independently of the Bank, McNamara explained that the study’s primary goal should be to convince skeptics that foreign aid remained a good investment. “I am facing the . . . problem of how to mobilize effective opinion in the ‘North’ behind an adequate development program,” he told Pearson. “I believe you could make an enormous impact on opinion around the world and particularly in those key countries which need to be convinced of the urgency of the problem and the possibility of a solution.”27
Given McNamara’s charge, it was little surprise that Pearson’s report, released less than a year later, was primarily a public relations piece designed to mitigate concerns about the effectiveness of foreign aid. While the report took up a number of important issues, such as the need for reductions in developed country import barriers, it downplayed evidence that development efforts had failed to reduce global poverty, arguing instead that that aid had an overwhelmingly positive impact. The report’s most noteworthy conclusion was its call for wealthy nations to increase their levels of official development assistance to 0.7 percent of their national incomes by the end of the 1970s.28 McNamara saw Pearson’s study as a valuable lobbying tool and informed his aides that he was “anxious that the report reach the highest levels of government officials in the developed countries.”29
Despite its limitations, Pearson’s report provided a starting point for rethinking international development strategies. To this end, in February 1970 Barbara Ward brought McNamara together with development experts and officials for a conference at Columbia University to discuss the study’s findings.30 Participants critiqued the report for having failed to take account of the full dimensions of global development.31 They also critiqued the 0.7 percent target as insufficient.32 In addition to greater aid flows, participants highlighted the need for domestic and international policy changes. For instance, redressing economic disparities within poor nations required that governments adopt “income distribution [and] land and tax reforms.” External debt forgiveness was also considered necessary to reduce inequality between rich and poor countries.33
McNamara relished the intellectual vitality of the conference. When the proceedings ended, he voiced his desire to tour the university. The organizers would have none of it. Columbia was only two years removed from one of the largest student uprisings in U.S. history, and the campus remained a hotbed of activism. Concerned about what would happen when one of the chief architects of the Vietnam War was seen strolling among the student body, they rushed McNamara into a taxi and sent him to the airport.34
If the former defense secretary remained a divisive figure in his home country, his willingness to speak about global poverty endeared him to many people working in development. While McNamara did not disclose his thoughts about the proposals raised at the Columbia conference, his remarks indicated his openness to rethinking traditional conceptions of development. “We must,” he told the participants, “look to more than gross measures of economic growth. What we require are relevant development indicators that go beyond the measure of growth in total output and provide practical yardsticks of change in the other economic, social, and moral dimensions of the modernizing process.”35 He did not specify what these indicators were. Still, this was an unusual level of engagement for a World Bank president, and his willingness to acknowledge the need for reform was one of the reasons why some in the development field found his leadership during this time “phenomenal.”36
Speaking about poverty proved easier than getting the Bank to do something about it. McNamara struggled to reorient the organization’s lending away from the large construction projects that had long dominated its portfolio. This was a result not only of the lack of a clear conception of what should displace infrastructure spending as the Bank’s primary focus but also the product of internal resistance to expanding the organization’s activities.
McNamara’s attempt to make population control a Bank priority demonstrated these challenges. By the time McNamara arrived at the Bank, many observers had come to believe that the rapid growth of the world’s population, estimated to have risen from 1.6 billion in 1900 to 3.7 billion in 1970, was a pressing economic, environmental, and political danger.37 Over the previous years, nongovernmental organizations like the Population Council, the International Planned Parenthood Foundation (IPPF), and the Ford Foundation had spent millions of dollars on demographic research and population control efforts. The UN also called attention to the need to reduce birth rates in developing countries, and prominent thinkers argued that global population growth placed an unsustainable burden on the planet.38 As Norman Borlaug, one of the fathers of the Green Revolution, put it, “the world’s population problem is a monster, which unless tamed will one day wipe us from the earth’s surface.”39
McNamara shared these concerns, and he positioned the Bank to assist global population control efforts.40 Soon after assuming the presidency, he directed staff to investigate ways the organization could support population control in the developing world and asked his chief economic advisor to research the likelihood that population growth would lead to famine in the coming years. He further ordered senior management to include population programs in the first five-year lending plan, investigated the possibility of creating specialized population research and project departments, and directed staff to “give full attention to the rate of population growth [and] the actions being taken to reduce excessive growth to acceptable levels” in country reports.41
McNamara also spoke publicly about global population growth. In his first address to the Bank and IMF annual meetings, he argued that the “rapid growth of population is one of the greatest barriers to the economic growth and social well-being of our member-states.”42 In Argentina, he argued that population growth represented a “dark side” that could undermine development throughout Latin America.43 And in India, he warned that a “tidal wave of population growth” threatened to derail the subcontinent.44 McNamara delivered his most extensive remarks on the issue at the University of Notre Dame in May 1969. He told the predominantly Catholic audience that global population growth would “diminish, if not destroy, much of [mankind’s] future” and called on wealthy nations to “give every measure of support” to population control efforts in the developing world.45
McNamara’s campaign bore some initial fruit. In 1969, the Bank established a special Population Programs Department and the following year approved its first population project, a $2 million loan to assist the government of Jamaica construct maternity hospitals that would supervise family planning efforts. Two years later, the Bank began working with the governments of Tunisia and Trinidad & Tobago on population control projects. And in 1972, it made loans for the construction of maternity clinics in Indonesia and India, the Bank’s two most populous developing countries. The organization also conducted research on population growth and began to include sections on demographic trends in its country reports.46
Nevertheless, the Bank’s population control efforts soon stagnated. Delays and cost increases plagued its population projects, and it made less than two dozen population loans over the following eight years, many of which were supplements to earlier loans.47 McNamara grew frustrated. In 1974, he acknowledged that population projects were proceeding “very, very slowly.”48 The following year, he informed management that he was “uneasy about our population work,” since “projects were not well formulated . . . often were not integrated into a country program; [and] . . . were not carried out effectively.”49
The Bank’s population lending failed for a number of reasons. For one, the population control movement ran out of steam during the 1970s as birth rates began to decline and evidence accumulated that initiatives were often ineffective and sometimes occasioned forced sterilizations. Developing country officials were also uninterested in the Bank’s population loans. Latin American leaders rejected McNamara’s calls to try to curb population growth with what an observer described as “florid indignation,” and Bank staff found that their efforts in Africa “arouse[d] suspicion of white motives.” In addition, population lending did not conform to the professional norms of the Bank’s staff, which consisted mainly of economists and engineers. Perhaps more important, the fact that population loans tended to be inexpensive made them unattractive to staff who were under pressure to meet lending targets. Thus, Bank managers noted that they were “reluctant to schedule . . . projects like population in a time when rigid planning had become necessary.” As McNamara later recalled, population “loans were small, and it took a tremendous amount of time to fashion the projects. So it was a burden rather than a plus” to staff.50
McNamara was aware from an early point that the Bank might struggle to develop a population control program. In the spring of 1969, a staffer in charge of formulating the first population loan to Jamaica told McNamara that he was having difficulty determining a “sizable project for Bank lending.” The best the Bank could do, it seemed, was lend half a million dollars for construction of a maternity center in Kingston, a far cry from the multimillion dollar infrastructure projects the organization was used to funding. The staffer told McNamara that he could increase the loan amount if, in addition to funding the maternity center, the project also encompassed general health services. McNamara shot him down in language that was as calculating as it was cold. He was, he remarked, “reluctant to consider financing health care unless it was very strictly related to population control, because usually health facilities contributed to the decline of the death rate, and thereby to the population explosion.”51
Indeed, for as much as he broadened the Bank’s focus, McNamara could be remarkably indifferent to the plight of those in need. In 1969, he turned down a request from the UN High Commissioner for Refugees for help in erecting a water supply system for a Sudanese refugee camp because he did not consider it a proper “development project.”52 McNamara also declined calls to support community development initiatives because “the amounts of money” such projects would require were “relatively small.”53 And while Bank managers recommended lending for health projects as early as 1974, the organization did not begin to do so until the end of the decade.54
Instead, McNamara remained focused on increasing the volume of Bank lending. This reflected both his fixation with numerical targets and his conviction that a lack of capital was the main constraint on development, a view advocated by his recently recruited chief economist Hollis Chenery.55 McNamara also spoke about the need for governments in developing countries to “reorient their development policies in order to attack directly the personal poverty of the most deprived 40 percent of their populations.”56 He had the organization expand its research to encompass issues like unemployment that previous presidents had considered peripheral to the organization’s growth-centric agenda.57 And he positioned the Bank to support scientific and technological solutions to development problems.58 The most prominent of these initiatives were the Onchocerciasis Control Program, a network of governmental bodies, international agencies, and private companies established in 1972 to address river blindness in West Africa, and the Consultative Group on International Agricultural Research (CGIAR), in which the Bank coordinated funding for agricultural research among governments, international organizations, and private foundations.59
CGIAR reflected McNamara’s awareness of the promise and perils of the Green Revolution. “Nothing has impressed me more than this successful agricultural revolution which is taking place,” he told journalists in India in 1968. “I have seen farmers today whose harvest this year and last has doubled, tripled or quadrupled.”60 Like many observers, however, McNamara was aware that the majority of these gains had bypassed small farmers, a situation he found economically and politically problematic. As he told aides in 1969, “there was no doubt that the Green Revolution would predominantly increase the income of the rich peasants and thereby create additional social stress.”61
McNamara’s concern that the Green Revolution might turn red encouraged him to reform the Bank’s rural development approach. Early in his tenure, he became convinced that the Bank not only needed to increase the overall amount that it lent for agriculture but also that more of these funds should be devoted to small farmers, as opposed to the large commercial farmers that had benefitted from previous Bank assistance.62 To this effect, in 1971 he discussed with his aides the need for a rural development program focused on small farmers, and the following year the Bank established a rural development unit.63 The centerpiece of the Bank’s program was integrated rural development (IRD), which aimed to increase the productivity of small farmers through the provision of credit for the purchase of seed, farm machinery, and fertilizer, the construction of irrigation works to water crops and feeder roads to connect these farmers to national and international markets, and the establishment of training centers that would help educate participants in new agricultural methods. Such comprehensive interventions would, it was assumed, increase the productivity, incomes, and welfare of small farmers.64
The Bank also embarked on an ambitious urban development program in McNamara’s early years.65 By the late 1960s, the rapid growth of cities in developing countries had become a considerable source of concern.66 This was due to the simple fact that many municipalities could not cope with the continuous influx of residents from the countryside. A 1972 Bank study, for instance, found that approximately one third of urban residents in developing nations lacked proper housing and utility services.67 As with rural poverty, McNamara saw urban poverty as both an economic and political problem, warning that failure to ameliorate “unspeakably grim” conditions in third world cities would lead to “violence and civil upheaval.”68 To this effect, in 1970 he jettisoned the Bank’s traditional aversion to lending for urban development projects by establishing an Urban Projects Division to determine how the Bank could help solve what he termed the “growing urban crisis” in the developing world.69 The organization’s urban development approach concentrated on “sites and services” projects in which the Bank funded the construction of basic housing and utility services. In 1972, the organization offered its first such project to the government of Senegal. The loan funded housing units, primary roads, water and power networks, sanitation facilities, primary and secondary schools, and health centers in Dakar and Thies.70
Figure 3. Visiting Senegal in 1969. Courtesy of the World Bank Group Archives.
In addition to rural and urban development, McNamara sought to expand the Bank’s support of education. The Bank had begun funding education projects in the 1960s, but its efforts were limited. Only four percent of Bank education lending prior went toward primary education. Moreover, the vast majority of education loans were for the construction of school buildings, rather than curriculum development or teacher salaries. Believing that improvement of human capital was a necessary component of development, McNamara ordered the Bank’s senior managers to seek out ways to “substantially increase” education lending. As a result, the organization’s education portfolio grew from $187 million in the period between 1963 and 1968 to $761 million between 1969 and 1973. McNamara also changed the ways the Bank supported education. At his direction, the organization increased its support of primary education, funded teacher training and curriculum development, researched the relationship between education and economic growth, and began to advise developing country officials on education policies.
Like his alteration of the Bank’s structures and procedures, McNamara’s efforts to change the Bank’s operational focus engendered internal resistance. Some staff felt that in trying to reform the Bank’s approach McNamara was “slighting growth in order to pursue redistribution.”71 Others saw poverty alleviation as a politically sensitive subject that developing countries should deal with on their own.72 Organizational pressures also played a role. According to one observer, staff were concerned that “time required to design and supervise a project to ensure that it reaches the poor is excessive in the context of the needs to meet deadlines, appraise traditional projects, and meet quantitative lending targets.” This mattered because of the widespread belief that “punctual, technically tight work” was critical for promotion.73
IRD projects were a particular source of tension. One former World Banker remembers that IRD provoked “a lot of resistance” among the organization’s agricultural hands.74 Many complained that these projects were “too complex and cumbersome” and that that they were “under pressure from various managers and program staff to make rural development projects multisectoral or ‘integrated’—even when they feel that a simple single sector approach is more effective and preferable.” Some saw quality being sacrificed with the IRD approach and worried that “little weight was put on making sure the projects were well implemented.”75 As one Bank staffer who worked in East Africa during the early 1970s recalled:
Traditional old-hand project people thought IRD was basically nonsense . . . much too utopian. They were often not very grounded in the country politics, meaning people, because they were working globally, would sort of fly into a country, meet with the President, accept his word, and then head out. And those projects, many of them, were not very successful . . . even though they had many more resources put into them.76
Bank staff also resisted McNamara’s efforts to refine the way the organization measured its impact. For instance, in 1973 Bank management explored the possibility of creating a framework for estimating the “social rate-of-return” of Bank projects.77 Yet Bank staff successfully opposed these efforts on the ground that it required them to “make up data, guess at parameters, and thus produce unprofessional analyses.”78 As the Bank’s head of operations later recalled, management’s attempts to introduce new evaluation metrics were “rudimentary” and “very imprecise” and, as a result, “nobody took it too seriously.”79
Despite such setbacks, McNamara’s efforts to expand the Bank’s lending began to show results. In 1973, agriculture surpassed transportation as the Bank’s primary lending sector, and by the middle of the decade poverty-oriented projects constituted a quarter of the organization’s lending.80
Table 1. IBRD/IDA Lending Commitments by Sector, 1968–1981 (percent of total, three-year average)
Source: Task Force on the World Bank’s Poverty Focus, Focus on Poverty: A Report by a Task Force of the World Bank (Washington, D.C.: World Bank, 1983), 6.
The reorientation of the Bank’s lending was animated by the idea that, as McNamara put it in 1973, “growth is not equitably reaching the poor, and the poor are not significantly contributing to growth.”81 McNamara’s solution to this problem was for developing countries to suspend their efforts to rapidly industrialize and, instead, capitalize on their unique resources. He felt, for instance, that the masses of poor people in developing countries could contribute to development by producing “precisely those labor-intensive goods which labor-scarce affluent countries need.”82
In advancing these views, McNamara was influenced by his key advisors, especially Mahbub ul Haq, who impressed upon McNamara the need to incorporate, rather than bypass, the poor in development interventions. “He was convinced that growth was not trickling down,” ul Haq later recalled of McNamara’s thinking in the early 1970s, and “he wanted to know precisely how you could reach them.” While it had a humanitarian component, McNamara’s approach was not based on charity. Rather, in ul Haq’s words, “the focus was on . . . increasing the productivity of the poor.”83
Redistribution with Growth, a book published jointly by the Bank’s Development Research Center and the University of Sussex’s Institute of Development Studies in 1974, constituted the most comprehensive statement of the Bank’s thinking at the time.84 The study both reflected the belief in the need to pay greater attention to the poor and demonstrated that the Bank was only willing to go so far in advocating for fundamental changes.85 “More than a decade of rapid growth in underdeveloped countries has been of little or no benefit to perhaps a third of their population,” it began. “Although the average per capita income of the Third World has increased by 50 percent since 1960, this growth has been very unequally distributed among countries, regions within countries, and socio-economic groups.”86 Moreover, about half of the global population earned less than $75 per year.87 In the authors’ minds, these figures demonstrated the fallacy that developing countries needed to postpone addressing welfare and equity issues to accelerate their growth. “It is necessary to discard the conceptual separation between optimum growth and distribution policies,” the study argued. “Distributional objectives [could not] be viewed independently of growth.”88 Despite these concerns, Redistribution with Growth proposed only modest reforms. Governments should not adopt more progressive tax systems because doing so would have “too high a cost in terms of foregone investment,” and measures like land reform were impractical given the political resistance of wealthy landowners.89 Instead, the authors argued that increasing human capital was the key to development. As a result, developing countries needed to make greater investments in education and public health.90 “The transformation of poverty groups into more productive members of society,” it concluded, “is likely to raise the incomes of all.”91
If the Bank sought to forge a middle ground between the status quo and radical measures, it was also coming to view its role in a new light. Arguably the most important aspect of the Bank’s approach under McNamara was the belief that lending for discreet projects was an inadequate means of promoting development. “Overall programs of ‘policy packages’ rather than a set of isolated projects,” should be the basis for development efforts, the authors of Redistribution with Growth argued.92 “What we need—and what we must design,” McNamara reiterated in one of his speeches, “is a comprehensive strategy that will constitute an overall plan into which particular policies and individual projects can be fitted as logical, integral parts.”93 As he explained, because development would only come about through a “reorientation of the attitudes and life styles of hundreds of millions of people,” the Bank’s “central test” was to formulate “a sound development plan” for developing countries.94 One Bank staffer recalled the logic of the Bank’s move toward more comprehensive interventions. “As McNamara saw a need to engage in rural development, with poverty, with urban development, the organization came to recognize that everything connects to everything else.”95
McNamara’s expansion of the Bank’s agenda was an important moment in the history of development. In the decades prior to McNamara’s presidency, poverty was widely considered an implicit development goal, and development was largely synonymous with accelerating economic growth. Poverty alleviation remained the domain of nongovernmental organizations, while governments and international organizations focused on promoting industrialization. Yet in getting the Bank to focus on things like rural and urban development, and through his speeches on the need to improve conditions for the global poor, McNamara helped place poverty onto the development agenda.96 By the mid-1970s, concerns with poverty became widespread at the national and international levels. For instance, in 1973, the U.S. government reformed its foreign aid program so as to better meet the needs of poor people in developing countries. A few years later, the International Labour Organization was calling on governments and aid agencies to shift their development goals toward meeting people’s basic needs.97 By 1975, Bank officials noted that the poverty focus had begun to “penetrate” development discourse around the world.98
Figure 4. Addressing the opening session of the 1973 World Bank-IMF annual meetings in Nairobi, Kenya. In his speech, McNamara called on the international community to attack “absolute poverty.” Courtesy of the World Bank Group Archives.
Despite its influence, the Bank’s approach suffered from a number of flaws. Bank publications, research and operational documents, and McNamara’s public and private statements provided a highly tautological explanation for global poverty. The poor were poor because, in the words of one observer, they “lacked jobs [or] . . . were unproductive.”99 While the Bank paid homage to the importance of economic reforms, it devoted scant attention to issues of policy implementation. The farthest the Bank tended to go in this direction was to call for increased political will on the part of developing country officials in making their nation’s economic policies more progressive. And, though the organization at times was critical of borrowing governments, such concerns did not systematically influence lending decisions.100 The Bank’s avoidance of politics extended to the international level. For example, while McNamara emphasized the need for industrialized nations to lower their import barriers to assist developing country exporters, he argued that wealthy nations could make their greatest contribution to global development by increasing their foreign aid flows, preferably channeling this assistance through the Bank.
Finally, the Bank’s interest in reducing global poverty never displaced its concern with promoting growth.101 “Policies aimed at diminishing income inequalities through direct redistribution of wealth will not be sufficient,” McNamara said in 1975. “No degree of egalitarianism alone will solve the root problem of poverty.”102 As he later put it, “there was no way one could address poverty in the developing world by redistribution” alone. Instead, “increasing output in the society” required “invest[ing] where you get the highest rate of return . . . the poor.”103 Viewing poverty reduction as a question of the productivity of the poor meant that its efforts targeted individuals who had enough resources to make productive use of external assistance, people who by definition were not the poorest.104 IRD, for instance, targeted farmers who owned small plots of land, rather than tenants.
McNamara also upheld the Bank’s macroeconomic orthodoxy by stressing the importance of limiting inflation, reducing budget deficits, and liberalizing trade. To take a few examples, in 1970 he praised Colombian president Carlos Lleras Restrepo’s “efforts to restrain inflationary pressures” as well as his broader concern for “financial stabilization.”105 He privately urged Costa Rican president José Figueres Ferrer to improve the country’s fiscal position.106 And he informed Central African Republic President Jean-Bédel Bokassa that reducing the country’s import barriers was a condition for Bank assistance.107 As McNamara explained to an interviewer, in order to grow developing countries needed to “increase their private savings [and] . . . expand their trade.”108
Although McNamara continued to advance a vision of development that focused on growth and stability, the poverty focus marked a departure from the Bank’s past insofar as it increased the organization’s willingness to intervene in the domestic affairs of developing countries. McNamara’s effort to expand the Bank’s agenda brought the organization into contact with issues that it had previously considered domestic and, as such, outside its control. As one observer noted at the time, the Bank had begun to embark systematically on “efforts to influence the general development policies of the countries which borrow from it on issues much more politically delicate, much more traditionally domestic, than issues related to growth in the gross national product on which the Bank Group has in the past attempted to exert leverage or influence.”109 McNamara himself admitted as much when he noted in 1975 that “we are trying to help the developing nations remake their societies.”110
To this effect, McNamara felt that the Bank’s major contribution would be to promote policy reform in developing countries, rather than to provide finance for particular development projects. This change did not go unopposed. In the early 1970s, developing country officials voiced their concerns about the Bank’s “serious interference in governmental affairs.”111 There was a danger, noted one Tanzanian official, that the organization was coming to view itself as “a world planning authority supplanting national effort.”112 No less a figure than Eugene Black, the Bank’s third president, who had made project lending the primary focus of the organization, warned McNamara that his focus on “constructing global development strategies” was taking the Bank beyond the limits envisioned by its founders.113 Despite such concerns, McNamara pressed on. As the Director of the Bank’s International Relations Department boasted in 1973, “the Bank can do practically anything it wants to do in pursuit of its objectives. The important issues to discuss are not whether the Bank can do this or that but whether it should and how.”114
It is not surprising that McNamara, a former Kennedy and Johnson official, brought to the World Bank the modernizing spirit that had characterized the U.S. foreign aid program of the 1960s. Nor was his transition from the military to the development field unusual given the ways techniques developed to promote national security, such as systems analysis, frequently found civilian applications in the 1970s.115 Because of his unique history, however, McNamara benefited from this transition more than most. The Bank presidency not only provided him with a convenient excuse for maintaining his silence on Vietnam, but it also allowed him to maintain a significant degree of influence on the world stage. In addition, the Bank allowed McNamara to at least partially rehabilitate his reputation. After a 1975 appearance on the television program Bill Moyer’s Journal, for instance, viewers wrote McNamara praising him for his “charisma” in explaining the dimensions of global development.116 McNamara’s efforts at the Bank even won over some critics of the Vietnam War. “There are some of us out there who would like to know how a man so associated with the foreign policy of the Johnson administration could lead the World Bank toward its present policy,” a man from South Carolina told McNamara. “We have come a long way since 1968.”117 As one of McNamara’s former aides explained, “I do not believe the assertion that McNamara was at the World Bank in some kind of repentance mode. I think he had these core instincts. Nevertheless, I do think people came to have a different view of him as a result of his passionate commitment to development.”118
Even so, McNamara the World Banker continued to be involved in Vietnam. While at the Bank, he conferred with Henry Kissinger, Richard Nixon’s influential national security adviser, on U.S. policy in Southeast Asia. McNamara encouraged Kissinger to withdraw U.S. forces from Vietnam, but he also let Kissinger know that he supported the administration’s secret plan to bomb Cambodia.119 In response to a request from the U.S. Department of State, McNamara also had the Bank provide assistance for a UN-sponsored program for development of the Mekong Delta.120 The Bank provided technical assistance to the government of South Vietnam and hosted South Vietnamese officials at its headquarters.121 In 1973, McNamara dispatched a “reconnaissance mission” to the country to locate suitable projects for Bank funding.122 And following a request from South Vietnamese president Nguyen Van Thieu, he convened a meeting of industrialized nations in Paris to discuss establishing an aid group for South Vietnam.123 McNamara argued that “unless aid in the amount, kind, and quality appropriate to the circumstances of Indochina is forthcoming in the next year or two, the prospects of lasting peace and stability toward which the governments of Indochina and others have been striving will be largely endangered.”124
Indeed, for all the change that he wrought at the Bank, McNamara could not escape his past. At the World Bank he was as much a symbol of the establishment as he had been at the Department of Defense, and demonstrators frequently confronted him over his past and current work. Two years after crowds in Calcutta forced him to flee the city, authorities had to erect barricades to keep protesters from storming the 1970 IMF-World Bank annual meetings in Copenhagen. The following year, the New York Times published the Pentagon Papers, a confidential history of U.S. involvement in Vietnam that McNamara had commissioned in 1967. The Pentagon Papers revealed the depths of official deception during the escalation of the war, reviving memories of McNamara’s dishonesty just as he was starting to make his mark at the Bank. The 1972 release of The Best and the Brightest, David Halberstam’s scathing critique of the war’s mismanagement, further fueled the fire. Within the Bank, the book became “required reading,” and staff began to wonder whether they could trust their boss.125 In the fall of that year, a man tried to throw McNamara overboard a ferry that was taking him to his vacation home on Martha’s Vineyard.126
Nevertheless, those who continued to see McNamara as a symbol of the Vietnam War missed the broader impact that he was having as president of the World Bank. Under McNamara, the organization helped to bring a number of countries into the Western orbit. With McNamara’s encouragement, Romania joined the Bank in 1972, and over the coming five years its government received nearly half a billion dollars in Bank assistance.127 The Bank was also an important source of aid for Yugoslavia as it solidified its “market socialist” model in the 1970s.128 Under McNamara, the organization forged ties with the government of Egypt as the country embarked on capitalist reforms, and as noted earlier it helped Indonesia integrate into the international economy.
As was true of his time at the Ford Motor Company and the Department of Defense, Robert McNamara was both a symbol and agent of historical change at the Bank. After streamlining assembly lines as the U.S. consolidated its industrial might in the 1950s and overseeing the war in Vietnam as U.S. military power crested in the 1960s, he now found himself riding the wave of globalization at the Bank, capitalizing on the emergence of new countries, markets, and ideas. Nevertheless, global forces would soon overtake both him and his organization.
