The ongoing furore at the World Bank over its President, Paul Wolfowitz, and his alleged corrupt involvement in arranging a lucrative secondment to the U.S. State Department for his girlfriend has, quite inadvertently, done the world an enormous favour. For the furore (I hesitate to join other commentators in calling it a scandal) has shone a spotlight on the Bank's operations and, in so doing, exposed the Bank for what it really is: one of the most corrupting institutions in the world.

You'll notice that I have deliberately chosen to describe the World Bank Group (to give the Bank its proper and preferred name, since it is actually not one, but five different organisations) as corrupting and not corrupt as such. This is an important distinction. To use a grammatical allusion: in being corrupting the Bank is the subject (i.e., the actor), whereas in being corrupt the Bank is the object (the acted upon).

The World Bank was established in 1944, toward the end of the Second World War, principally as a vehicle for spearheading the reconstruction of Europe's devastated economies. It was formally known as the International Bank for Reconstruction and Development (IBRD). Its formal name made its original objectives abundantly clear and the Bank was extremely successful in achieving those objectives. Since then the World Bank has grown to include: the International Finance Corporation (IFC), established in 1956; the International Development Association (IDA), established in 1960; the International Centre for Settlement of Investment Disputes (ICSID), established in 1966; and the Multilateral Investment Guarantee Agency (MIGA), established in 1988. Full marks to anyone who can figure out what unique and indispensable services the IFC, IDA, ICSID and MIGA are supposed to be providing to the world.

As the number of acronyms associated with the Bank have proliferated, the Bank's purposefulness and effectiveness has diminished. Today the World Bank is a huge multinational bureaucracy with some 10,000 employees. It has its headquarters in Washington DC and over 100 country offices. And yet only 30% of its employees are based in country offices in the developing world, the supposed focus of its current efforts. In other words, 7,000 of the Bank's 10,000 employees are based in Washington DC, or places very much like it. Many of these employees are among the brightest and best educated citizens of developing countries. By its own admission, the World Bank is not a bank in the conventional sense. It does not produce economic wealth and value in the conventional sense, nor is it subject to the economic realities and constraints that other banks are subject to. The Bank is a consumer (cynics would say destroyer) of economic wealth and value. The skills of its highly talented workforce, particularly those from the developing world, would surely be better employed in the private or public sectors in their host or home countries. At least there, they would stand a better chance of participating in or facilitating the creation of wealth, which is, in the final analysis, the only known antidote for poverty.

It is a well known fact that World Bank jobs offer some of the most generous remuneration packages in the world to those lucky enough to get them. It's one thing when a private company pays extravagant salaries and awards lavish perks (Google is a famous example). It's quite another when a non-profit organisation like the World Bank, especially when its stated purpose is to improve the lot of the world's poor, does the same thing. This can only have a corrupting influence on those who work at the World Bank.

But the World Bank also has a corrupting influence on the countries which it is designed to help. The Bank exerts inordinate power on economic, and in some cases political, decision-making in developing countries. Such power makes a nonsense of local democratic accountability as governments fall over themselves to please the World Bank and its fraternal twin sister, the International Monetary Fund (IMF). In many cases, local governments are more beholden to the World Bank and the IMF than to their own electorates. Naturally this breeds resentment—both in the governments and the governed. Venezuela's and Angola's recent sudden exits from the World Bank and IMF are surely the subject of secret glee and envy in many capitals of the developing world. Furthermore, the Bank's proclaimed mission of reducing global poverty has proved to be as unattainable as it is admirable. The Bank's myriad projects have failed to result in any discernible reduction of global poverty. In the places in the developing world where poverty has been reduced, it has been in spite of the Bank's efforts, not because of them. This can only have a corrupting effect on governments in the developing world and their luckless populations.

Finally, the World Bank has a corrupting influence over those in the rich world, especially the U.S. government, who have tended to use the Bank as a tool of "diplomacy by other means". Bribery, in short. Oh, nobody calls it that in polite society, but that is most assuredly what it is. It must be extremely expedient for Western governments to punish recalcitrant governments in the developing world by withholding World Bank and IMF "assistance"; and conversely reward compliant ones. Extremely expedient—and ultimately counter-productive. Government-to-government relationships should be based on principles and values, not on what is politically, economically, militarily, or otherwise, expedient. Anything short of this will result in certain, inevitable negative consequences.

And so the World Bank has become one of the most corrupting institutions in the world, a fact that is becoming increasingly apparent to any honest observer.

So what should the world do about it?

We have two choices.

We can continue on the current path of fanaticism, which you'll recall was defined by George Santayana as redoubling your effort when you have forgotten your aim. The World Bank is already very far down this path, having quintupled its efforts: IBRD, IFC, IDA, ICSID and MIGA. God knows what will be next.

Or, we can ask a very simple question: What is the point of the World Bank?

Unless this simple question is asked openly and answered honestly, the World Bank will continue to drift further and further away from the realities of today's world and become increasingly corrupting and corrupt as its role diminishes on the world stage (perhaps counter-intuitively). The countries it is supposed to be helping will continue to smile outwardly, whilst ferociously plotting inwardly on how to follow Venezuela and Angola through the door marked "EXIT".