Robert McNamara's Second Vietnam
by Walden Bello
www.commondreams.org/, July 14,
The conventional view of Robert McNamara,
who passed away a few days ago, is that after serving as the chief
engineer of the disastrous U.S. war in Vietnam, he went on in
1968, to serve as president of the World Bank. In this way, he
sought to salve his troubled conscience by delivering development
assistance to poor countries.
The reality is, as usual, more complex.
Development from Above?
As president of the Bank, the world's
premier channel for multilateral aid, McNamara did quadruple the
institution's lending portfolio to $12 billion. The key beneficiaries,
however, were authoritarian dictatorships. Indeed, the rise to
hegemony of authoritarian regimes in the developing world cannot
be separated from the massive funding that the World Bank under
McNamara provided them. By the late 1970s, five of the top seven
recipients of World Bank aid were military, presidential-military,
or military-controlled regimes: Indonesia, Brazil, South Korea,
Turkey, and the Philippines.
Why did the Bank under McNamara feel a
special affinity to military-dominated regimes? A major reason
stems from McNamara's own background. He was one of the prototypes
of the "technocrat," a term coined in the early 1960s
to refer to the seemingly apolitical practitioner of the science
of political and economic management. As chief executive of the
Ford Motor Company and later head of the Defense Department, McNamara
ran organizations that were hierarchical and non-democratic in
structure. Not surprisingly, he was susceptible to the rhetoric
of authoritarian regimes that promised to sanitize the political
arena in order, according to them, to allow economic managers
the space to modernize the country.
The Marcos Connection
Philippine President Ferdinand Marcos
was one of the leaders who most successfully cultivated the image
of bringing "development from above." In 1972, he imposed
martial law in order, in his words, to "break the democratic
deadlock" that had become a barrier to development. "All
that people ask," Marcos explained, "is some kind of
authority that can enforce the simple law of civil society. Only
an authoritarian system will be able to carry forth the mass consent
and to exercise the authority necessary to implement new values,
measures, and sacrifices."
Skillfully deploying a cadre of technocrats
to impress the World Bank president, Marcos won McNamara over
to backing his regime in a major way. The country was upgraded
to what the Bank called a "country of concentration."
Between 1950 and 1972, the Philippines received a meager $326
million in Bank assistance. In contrast, between 1973 and 1981,
the Bank funneled more than $2.6 billion into the country. Whereas
prior to martial law, the Philippines ranked about 30th among
recipients of Bank loans, by 1980 it placed eighth among 113 developing
In return for this massive increase in
aid, the Bank was given carte blanche to forge a comprehensive
economic development plan for the Philippines. The two pillars
of the strategy were "rural development" and "export
Containing the Countryside
"Rural development" was the
Bank's response to the agricultural crisis. The centerpiece of
the strategy was increasing the productivity of small farmers
through the delivery of "technological packages" and
upgrading agricultural support services like credit systems. Rural
development, however, had implications that went beyond improved
As McNamara explained to the Bank's board
of governors, the strategy would "put the emphasis not on
redistribution of income and wealth - as justified as that may
be in our member countries - but rather on increasing the productivity
of the poor, thereby providing for an equitable sharing in the
benefits of growth." In short, rural development was partly
counterinsurgency, directed at defusing the appeal of the revolutionary
movement among the restive rural masses. It was, as one development
specialist close to the Bank described it, "defensive modernization"
which, if successful, will create a smallholder sector closely
integrated with the national economy. Bank projects will encourage
subsistence farmers to become small-scale market producers. With
economic ties to other sectors, the farmers will be loath to link
their interests to those not yet modernized and will hesitate
to disrupt the national economy for fear of losing their own markets.
When it came to industry, McNamara pushed
Marcos and other World Bank clients to "turn their manufacturing
enterprises away from the relatively small markets associated
with import substitution toward the much larger opportunities
flowing from export promotion." Quotas were to be eliminated
and tariffs brought down to expose protected local industries
to the winds of international competition; exporters were to be
given incentives; export processing zones were to be set up; and
wages were to be kept low to attract foreign investors. The Bank
shot down a plan by Marcos' more nationalistic technocrats to
set up "11 big industrial projects," including an integrated
steel industry and a petrochemical complex. The Bank did not consider
this attempt to create a strategic industrial core to be in line
with export promotion.
As in the case with rural development,
there was a social logic to export-oriented industrialization.
Persisting in industrialization based on the internal market would
have meant having to undertake massive income redistribution in
order to expand the market necessary to sustain it, a move opposed
by the local elite. By instead hitching the industrialization
process to growing export markets, the Bank broke the link between
industrialization and domestic income redistribution. The cost,
however, was intensifying class conflict as governments attempted
to keep wages low and exports competitive.
The World Bank vision was grand, but implementation
of a project that favored foreign interests and the traditional
elites met mass resistance. The project was also dogged by corruption,
cronyism, incompetence, and when it came to land reform, lack
of political will. Then there was the special problem of Philippine
First Lady Imelda Marcos, who wanted to corner more and more World
Bank money for her projects. "Mrs. Marcos," one Bank
bureaucrat wrote in a briefing paper for McNamara, "has identified
herself with a few showcase projects that we consider ineffective
and which are a bit of a joke among knowledgeable Filipinos."
Crisis and the Advent of Structural Adjustment
By the early 1980s, the World Bank program
was floundering, prompting management to commission political
risk analyst William Ascher to assess the situation. Ascher's
findings were grim. The Marcos regime was marked by "increasing
precariousness" and "the World Bank's imprimatur on
the industrial program runs the risk of drawing criticism of the
Bank as the servant of multinational corporations and particularly
of US economic imperialism."
In a desperate effort to salvage a deteriorating
situation, the Bank forced Marcos to appoint a cabinet of technocrats
headed by Prime Minister Cesar Virata, its most trusted agent
in the country. But the cure that Virata and company administered
was worse than the disease. The country was subjected, along with
only three other countries that agreed to be guinea pigs, to an
experimental Bank program called "structural adjustment"
that involved the comprehensive liberalization and deregulation
of the economy. The program, one of McNamara's last innovations
before he retired in 1981, sought to fully expose developing economies
to international market forces in order make them more efficient.
In the Philippines, this adjustment entailed bringing down the
effective rate of protection for manufacturing from 44 to 20%.
Instead of invigorating the economy, however, this shock liberalization
combined with the international recession of the early 1980s to
bring about deep economic contraction from 1983 to 1986.
Indeed, structural adjustment led not
only to deindustrialization; according to one study, it also created
so much unemployment that migration patterns changed drastically.
The large migration flows to Manila declined, and most migrants
could turn only to open access forests, watersheds, and artisanal
fisheries. Thus the major environmental effect of the economic
crisis was overexploitation of these vulnerable resources.
Adjustment led to a decade of stagnation
from which the country never really recovered, even as its neighbors,
who were smart enough to avoid being saddled with the program,
were registering 6-10% growth rates in 1985-1995.
Yet there was one unintended benefit for
the Philippines: The economic chaos that structural adjustment
provoked was one of the key factors that brought about the ouster
of Marcos in the combined civil-military uprising of February
By that time, McNamara had been out of
the Bank for five years. Ensconced in retirement, he must, however,
have seen parallels between the last U.S. helicopters leaving
Saigon in 1975 and Marcos going into exile in Hawaii on a U.S.
aircraft in 1986. The Philippines was McNamara's second Vietnam.
Like the first, it was a memory the once-celebrated whiz-kid of
the Kennedy administration would probably have preferred to bury.
Walden Bello is a member of the House
of Representatives of the Republic of the Philippines and president
of the Freedom from Debt Coalition. A retired professor of sociology
at the University of the Philippines, he is currently a columnist
at Foreign Policy In Focus and a senior analyst at the Bangkok-based
analysis and advocacy institute Focus on the Global South. He
is the author of 15 books, the most recent of which is The Food
Wars (New York: Verso, 2009). He can be reached at waldenbello
(at) yahoo (dot) com.