True Believers at the World Bank

A few decades after the end of the war that he managed, former Defense Secretary Robert McNamara told us that the Vietnam War had been a mistake and he apologized.

Great. But when, I'd like to know, is he going to apologize for the World Bank?

In the late 1960s, you may remember, McNamara left the Defense Department and -- with what looked like relief -- went to run the World Bank. After masterminding the most ill-conceived U.S. war (till recent times), he may have seen an opportunity to redeem himself. In the years that followed, he apparently became so involved in the bank's poverty-fighting mission that he actually cried on a couple of occasions when he delivered the annual report.

But good intentions aren't everything, and, unfortunately, McNamara brought his penchant for ideologically driven strategies with him.

Before his presidency, the World Bank typically made loans to Third World governments to support transportation, irrigation, education and other basics that were meant to promote economic development. But there was a lot of corruption. For that and other reasons, the loans didn't always accomplish all that was hoped for.

In the McNamara era, the bank began to make loans on the condition that nations privatize public services and allow foreign money to move in and out of the country with little regulation. The idea was to create a climate in which private investment would lift people out of poverty. For the next 30 years, the World Bank and the International Monetary Fund followed this market-oriented strategy, which came to be known as "the Washington Consensus."

Before the McNamara years, the poorest people didn't get much richer. But during the Washington Consensus years, they got poorer and poorer.

I saw how that could be possible when I became a shareholder in the French water company Suez, which took over the water system of Johannesburg, South Africa.

To get ready for privatization, South African communities followed the World Bank/IMF suggestion that water rates be raised so consumers would get used to paying the full cost. The water of many people was cut off when they couldn't pay their bills. In some places they started taking water from rivers. The result was a cholera epidemic.

Cholera is an extreme result for a development scheme. But then, privatizing water in Africa is an extreme application of the World Bank's private investment theory. After all, a private company has to have some way of making money.