World Bank: McNamara Versus McNamar

A lively debate over the merits of foreign aid erupted on January 7 when former World Bank president Robert McNamara tangled with Reagan Administration officials, at a seminar sponsored by the Washington-based Brookings Institution.

Entitled "The Future of the World Bank," the day-long meeting attracted 150 people from the power elite in the United States: executives from such major corporations as Westinghouse, Alcoa and Bechtel; senior commercial banks from Citibank, Chase Manhattan and Morgan Stanley; investment bankers from the First Boston Corporation, Salomon Brothers and Merrill Lynch; U.S. officials from the departments of treasury and state; a smattering of academics; and reporters from the Wall Street Journal, New York Times, Washington Post and Journal of Commerce.

Those in attendance heard Robert McNamara (in one of his first public statements on aid and the World Bank since retiring as president of the institution in July, 1981) forcefully support his longstanding position that increased lending by the U.S. and the World Bank is important.

For the most part, McNamara eschewed moral appeals. Rather, he tried to convince his audience that aid best serves U.S. economic and political interests.

Without aid, McNamara argued, developing countries could not import as many goods from the West. "Such a reduction in imports would not only greatly reduce the rates of social and economic advance in the developing countries," McNamara claimed, "it would also exert severe deflationary pressure on the economies of the countries from which they import - i.e., the OECD (Western) nations."

Politically, aid is necessary, McNamara said, as a preemptive - measure to ward off threatening political changes in the third world. "The U.S. buys more security by spending a dollar for development assistance than for military hardware," he told the audience. "Economic advance will not guarantee political stability, but long-continued economic stagnation will assuredly lead to political disorder."

Speaking for the Administration was deputy secretary of the treasury, R.T. McNamar, who has a name but not a viewpoint similar to the former World Bank president.

In what has come to be the Reagan Administration line, McNamar downplayed the importance of aid, saying that "the greatest contribution the United States can make to developing countries is to have sustained non-inflationary growth in its own economy."

McNamar also discounted McNamara's political security argument. Rather than fearing political disruptions in countries that don't receive sufficient aid, the deputy treasurer flexed his muscles and said that U.S. military dominance removes the risk of such turmoil. "Those who criticize the United States for our `low' contribution to overseas development assistance," said McNamar, referring to McNamara, "should recognize the military security umbrella we provide for development."

McNamar's position represents "a real shift," particularly in regards to the poorest countries, says Idrian Resnick, who has consulted with third world countries on development issues.

Unlike the World Bank under McNamara, the Reagan administration is content to abandon the very poor countries, Resnick says. Since these countries don't represent a significant market or source of raw materials for U.S. corporations, the Reagan administration attitude, Resnick claims, is "let them die; let them go'."