Does the World Bank have a future?

As “the world goes gaga” over the pay-raise World Bank president Paul Wolfowitz arranged for his girlfriend, California congressman Brad Sherman bemoaned Tuesday at a congressional hearing, a slew of other flaws within the bank are ignored.

At the finance committee hearing, examining the role and effectiveness of the World Bank in combating global poverty, Sherman was primarily concerned with the approximate $270 million the bank has given to Iran over the course of Wolfowitz’s tenure.

“How can we convince the Iranian people that they will be cut off from the world if they continue to develop nuclear weapons when they are getting money from the World Bank, some of it ours?” he asked.

American politicians stay in office by “bringing home the bacon, even though it’s not kosher,” he said, and “the Islamic Republic is bringing home the bacon from the World Bank.”

The panelists at the hearing agreed the bank had problems— though they didn’t exactly argue it had problems keeping U.S. interests in mind.

“There is a widespread perception that the policies and practices of the bank are disproportionately driven by the [Bush] administration,” said Dr. Joseph E. Stiglitz, a professor at Columbia University. “Those who lost favor with the administration risked losing loans, while countries in favor could engage in corruption, without losing funds.”

Stiglitz went through a list of other legitimate problems with the bank, such as insufficient checks and balances and fears of retribution against whistleblowers.

“Large numbers of its senior people have departed…demoralized by what they saw happening” in the bank, he said.

Besides that, the changing world market threatens the utility of the bank, said Dr. Robert Hunter Wade, a professor at the London School of Economics and Political Science.

“[The bank] faces a whole array of new competitors such as China and Korea… private consulting firms… and the Gates Foundation and other private foundations,” he said.

These other institutions have not, however, left the bank irrelevant, Wade argued. The bank is still effective, he said, thanks to its “inter-governmental guarantees, its own large revenue base and its global reach.”

Furthermore, the bank has the potential to become a real leader in areas such as global warming, Wade said. It could take the lead decoupling economic growth and carbon emissions with new financing instruments, like a “carbon fund” that would allow countries to borrow money for environment-friendly power stations.

The panelists also expressed hope that the perception of corrupt American power in the bank could be diminished—if Wolfowitz’s successor is chosen for the right reasons and not because he or she is American.

“President Bush can send a powerful signal to the world by throwing open the contest to the entire world,” said Stuart E. Eizenstat, co-chair of the Atlantic Council Commission on Transatlantic Leadership for a New Global Economy. “That would turn the tragedy of the Wolfowitz incident into a plus for America’s image in the world.”

Like always, the World Bank and the United States have a common interest—but this time it is finding a leader who may not put America first.