On February 28, 1968, in a ceremony in the East Room of the White House, Lyndon Baines Johnson awarded Robert Strange McNamara the Presidential Medal of Freedom. It was a bittersweet moment for the outgoing secretary of defense. On one hand, the president spoke glowingly of McNamara’s seven years of public service, especially his transformation of the nation’s military establishment. On the other hand, even though nobody mentioned it, the Vietnam War was on everyone’s mind, and the honoree, who had played a key role in guiding U.S. strategy, looked like a broken man. When it came time for McNamara to address the audience, tears welled in his eyes. A few years earlier, he had been considered one of the most capable officials in Washington. Now, battered by criticism and gnawed by doubt, he stood silent, failure personified.1
Nevertheless, Johnson sounded a positive note for the future. Although Medal of Freedom recipients were usually at the end of their careers, the president announced that McNamara’s most important work lay ahead. Johnson had recently appointed his outgoing defense secretary to the presidency of the World Bank, a Washington-based intergovernmental organization dedicated to promoting global development. In this role, Johnson told the White House audience, McNamara would be able to “attack the root causes of violence and turmoil: poverty, disease, ignorance, and hopelessness” and thereby “win the most important war of all . . . promot[ing] freedom throughout the world.” Then, as if to convince those who doubted that one of the architects of the Vietnam War could succeed in his new fight, Johnson made a bold prediction. Many years hence, he declared, people would look back and say that a “revolution of achievement in the developing nations began with the appointment of Robert S. McNamara to the World Bank.”2
Despite this claim, Robert McNamara soon faded into obscurity. After the ceremony, the man who came to prominence as one of the “Whiz Kids” who saved the Ford Motor Company from bankruptcy in the 1950s departed the U.S. government for good. McNamara did not reemerge on the American public scene until three decades later, when he acknowledged that he and others in the Kennedy and Johnson administrations had been “terribly wrong” about the Vietnam War.3
But McNamara never went away. For thirteen years following that day in the White House—nearly twice the time he spent at the U.S. Department of Defense—he continued to put his stamp on history while presiding over the World Bank. Across the Potomac from the Pentagon, the former defense secretary went from prosecuting a war in Vietnam to fighting poverty around the globe. In the process, he transformed the World Bank and the field of international development in important and lasting ways.
This book tells this story. Drawing on a wide range of materials, including previously untapped World Bank documents, it details a largely unexplored chapter in the history of one of the world’s most important international organizations and in the life of one of the twentieth century’s most enigmatic figures.4 In so doing, it offers a window onto the international politics of the 1970s, the roots of globalization, and the origins of today’s development landscape.
Robert McNamara assumed the presidency of the World Bank on April 1, 1968, a little over one month after he tearfully departed the Johnson administration. The Vietnam War had taken an immense toll on him. As a result, few expected much of his time at the Bank. McNamara had other plans. Instead of fading away, the man whose fondness for quantitative analysis once led Senator Barry Goldwater to refer to him an “IBM machine with legs” immediately set out to reprogram the institution.5
Governments led by the United States had created the World Bank alongside the International Monetary Fund (IMF) in the waning days of World War II to ensure that the world economy would not break down and cause World War III. The Bank’s role was to promote economic expansion by making low-interest loans to governments. The idea was simple. The Bank would finance development projects in cash-strapped countries. This would propel growth, stimulate private investment, and improve living standards.
Despite these ambitious goals, the Bank was a conservative financial institution at heart. It raised most of its money by selling its bonds to private investors, rather than from government contributions. Consequently, the Bank avoided doing things that might jeopardize its creditworthiness. For many years, it did not lend to the world’s poorest countries because it believed that they would be unable to repay. Instead, the Bank lent mainly to governments in better-off nations in Asia, Latin America, and Europe. The Bank also did not fund projects in education, health, or other social sectors. Rather, it directed the bulk of its resources to energy and transportation projects, which Bank officials considered more productive or “bankable.” The Bank’s traditionalism was reflected in the composition of its staff, which in its early years was drawn almost entirely from the United States and Great Britain.
This approach did not suit McNamara. He had managed sprawling organizations at Ford and the Pentagon, and he found the Bank’s smallness unacceptable. Moreover, he viewed international development as a critically important issue. Like many at the time, he saw global poverty as both a humanitarian problem and a source of political conflict. McNamara wanted the Bank to expand its activities to address this set of challenges. “I have always regarded the World Bank as something more than a Bank, as a development agency,” he stated in his first speech as president. “I [am] determined on one thing: that the Bank can and will act.”6
McNamara pushed the World Bank in a number of new directions upon his arrival. He centralized decision-making authority in the Bank presidency and used this power to expand the organization’s borrowing and lending portfolios, staff size, and research program. At the same time, he broadened the organization’s focus from promoting the economic growth of developing countries to alleviating poverty within their borders. The vigor with which he sought to remake the Bank underscored his belief in the importance of development and made clear that he viewed the Bank presidency as a way to redeem himself after Vietnam.
It was a challenging time to be working in development. The belief that poor countries could, with the right mix of capital and expertise, accelerate their transformation into wealthier societies was widely shared in the postwar decades.7 When McNamara arrived at the Bank, however, many people had come to question whether development was possible or even desirable. Although the economies of many poor countries had grown impressively in the postwar decades, living standards often had not improved accordingly. Such findings contributed to a growing sense that foreign aid impeded, rather than encouraged, development. In the late 1960s, the longstanding belief in government’s ability to manage the economy also began to come under significant challenge. Meanwhile, nascent environmental, human rights, and feminist movements highlighted ways that economic growth exacerbated ecological, political, and social problems. As British economist E. F. Schumacher wrote in 1970, “development has gone ahead in many places, but the people, the poor, the great majority, have been bypassed and left out.”8
And then there was Vietnam.
When McNamara assumed the presidency of the Bank, it was becoming clear the war was a lost cause, at least from the U.S. perspective. This fact contributed to the mounting sense that foreign aid was ineffective and that nation-building efforts were doomed to failure. Yet, despite his own doubts about the war, McNamara clung to the belief that well-intentioned outsiders could engineer progress in the developing world. To McNamara, the tragedy of Vietnam was not that the United States had gotten involved in another country’s civil war. Rather, the problem was that military intervention had been necessary in the first place. In order to prevent similar conflicts from erupting elsewhere, McNamara the World Banker insisted that the Western world involve itself more extensively in the affairs of developing countries.
McNamara used his bully pulpit at the Bank to make this point, even as he dodged questions about Vietnam by claiming that his status as an international civil servant prevented him from addressing “political” issues. Whether he was speaking to the press at the Bank’s headquarters in Washington or visiting a Bank-financed project in a developing country, he insisted that development—defined to mean faster economic growth and better living standards—was the singular issue of the day. Previous World Bank presidents had sounded this theme, but McNamara brought unparalleled energy to the job. He continually lobbied Western governments to channel more money to the Bank, prodded officials in developing countries to reform their economic policies along lines the Bank recommended, and encouraged the Bank’s staff to deepen their engagement with issues the organization had previously ignored.
Coming at the same time that the foreign aid budgets of many Western countries were shrinking, McNamara’s activism thrust the World Bank into a leadership role in the international development field. Although Vietnam continued to haunt him, the former defense secretary soon gained a reputation as an antipoverty crusader, and the World Bank quickly emerged as the most powerful force in development.
But McNamara was no more able to escape the perils of his vision at the Bank than at the Department of Defense. Although he increased the organization’s stature and achieved some personal redemption during his thirteen years as its president, McNamara led the Bank to behave in ways that undermined its goals of promoting growth and alleviating poverty in the developing world. McNamara’s drive to increase the size and scope of the Bank’s lending contributed to a decline in the quality of projects that it funded. The Bank’s encouragement of expanded private lending to developing countries following the 1973–74 oil crisis also exacerbated the sovereign debt problems that started to plague many of these countries as the decade progressed. McNamara’s remedy for these problems, structural adjustment lending, made matters worse, as these loans obligated borrowing governments to adopt austerity policies that did little to promote growth or reduce debt.
In its most basic sense, Robert McNamara’s presidency of the World Bank is a story about good intentions gone awry. This is a common theme in the history of development.9 It also serves as a sequel to his tenure as secretary of defense. McNamara’s leadership of the Pentagon, particularly his management of the Vietnam War, has long been criticized for its focus on quantitative analysis and its prioritization of bureaucratic requirements over operational needs. As journalist David Halberstam put it, Secretary of Defense McNamara was “the quantifier trying to quantify the unquantifiable.”10 Similar dynamics characterized McNamara’s time at the Bank. McNamara’s primary goal at the organization was to increase its power. His focus on maximizing the Bank’s influence diverted attention from ensuring that its projects were worthwhile and that borrowing governments could afford its loans.
Yet McNamara’s greatest legacy at the Bank lies less in the organization’s particular failures and successes during the time than in his transformation of the organization. In many ways, Robert McNamara made the World Bank into what it is today. Although he was not the first Bank president to recognize that promoting development involved more than financing infrastructure projects, he was the first to insist that the organization devote significant resources to other sectors. Similarly, although McNamara was not the first Bank president to realize that the organization’s fundamental strength lay in its ability to advance ideas about development, he was the first to turn the Bank into an intellectual leader. And while the Bank had previously attached conditions to its loans to encourage governments to reform their economic policies, McNamara made conditionality a central feature of the organization’s work.
McNamara’s ability to move the Bank in these directions was as attributable to the force of his personality as it was to changes in the international political economy. The 1970s was a transformative decade in contemporary history.11 Among other developments, U.S.-Soviet tensions eased, countries in the global South sought to assert their economic independence, and transnational flows of goods, people, and capital—“globalization”—accelerated. The 1970s were also an important time for development, a practice that originated in the colonial era to become a centerpiece of world affairs as the United States and the Soviet Union battled for global influence in the postwar years. Over the course of the decade, the development agenda broadened from promoting the economic growth of developing countries to alleviating poverty within their borders. International and nongovernmental organizations also became centers of development thinking and practice. In addition, the preferred means of promoting development shifted from financing infrastructure projects to, on one hand, making “bottom-up” investments in human capital and, on the other hand, encouraging “top-down” policy reform.12
Robert McNamara’s World Bank was a key part of this history. Through his personal advocacy and his efforts to alter the Bank’s priorities, the former defense secretary was pivotal in placing poverty alleviation onto the development agenda. And by encouraging Western governments to channel their foreign aid through the Bank, he helped make multilateral lending a preferred vehicle for development finance. McNamara’s presidency of the Bank thus demonstrates the important role that international organizations have played in world affairs and the influence that particular individuals have had on history.13