The United Nations headquarters in New York has a problem: the toilets leak. This 50-year-old vision of the future also has faulty air-conditioning, asbestos in the walls and no sprinkler system. In short, the place needs a thorough overhaul. But it's not just the building that is in trouble. Many people believe the organisation itself is in dire need of reform.

Reform is not a new word to the UN. In the 1990s, it underwent a series of restructuring programmes. In 1998, the UN secretary general, Kofi Annan, spoke of creating "a revitalised United Nations" by the year 2001. In 2003, he proposed yet more reforms. There is also pressure for change from outside. The current occupants of the White House are no fans of the UN in its current form. Richard Perle, a former chief foreign policy adviser to George W Bush, has said that the Security Council "is simply not up to the task" and that the UN should be relaunched with a different charter. The British Prime Minister, Tony Blair, in a speech in Sedgefield earlier this year, called for a new agenda that included "reforming the UN, so its Security Council represents 21st-century reality; and giving the UN the capability to act effectively, as well as debate".

Many of the UN's critics believe that the organisation is overstaffed and wasteful. Even Annan has admitted that its management could be improved, saying: "Where we should have been flexible and adaptable, we have, all too often, been bureaucratic." However, spending on this bureaucracy has grown little in the past decade, from $1bn in 1991 to $1.07bn in 2001. Spending on peacekeeping operations has also remained remarkably low: the total in the past year - funding 13 separate operations and almost 50,000 peacekeepers - is around $2.5bn, roughly the same figure spent to police London each year. The total cost of all UN peacekeeping operations since 1948 equates to roughly a third of the cost of the recent war in Iraq.

Both Annan and his predecessor Boutros Boutros-Ghali have remarked on the difficulties of persuading member states to commit resources to back Security Council resolutions. A decade of budget freezes means that many UN programmes operate on a shoestring, limiting their effectiveness and sometimes leading to mission failures. In her book We Did Nothing, the Dutch journalist Linda Polman describes how UN soldiers in Haiti ran short of weapons and even had to borrow the paint to colour their helmets blue. The UN's operation in Afghanistan is an example of its most difficult role today - to help run a country after a foreign intervention. According to Polman, the UN's purpose in these situations is often to provide a "blue rinse" for the west. After an invasion, she argues, western countries are rarely interested in the dangerous and long-term business of nation-building, and leave it to the UN. When democracy subsequently fails to take hold, the west can blame the UN, not itself.

Cases such as Afghanistan show that the effectiveness of the UN cannot be judged in isolation, and is in fact directly related to the policies of its member states, which not only fund and staff the organisation, but also maintain tight control over the direction and implementation of many of its activities.

The UN is dominated by the US, UK, France, Russia and China - whose military victory in 1945 was transformed into control of the Security Council - as well as countries, such as Japan and Germany, that have significant economic muscle. Of these, the US and the European Union states place the most demands on the UN.

While these two may agree broadly on the threats that the UN should be concerned with - such as terrorism, weapons of mass destruction, regional conflicts, state failure and organised crime - they differ in their strategy. The EU's foreign policy strategy focuses on "effective multilateralism". Its security document states: "We are committed to upholding and developing international law. The fundamental framework for international relations is the UN Charter . . . Strengthening the UN . . . is a European priority." But the US under Bush has an instinctive dislike of international law and multilateralism, clearly demonstrated by his administration's rejection of the International Criminal Court and the Kyoto treaty.

These contrasting strategies suggest two different futures for the UN. With continued US unilateralism, the UN will either be abolished or simply wither away, and instead "coalitions of the willing" will be rounded up to support American actions. A second term for Bush may appear to guarantee this rather gloomy future, but the EU's preferred way may still win out.

Philip Bobbitt, a former adviser to Bill Clinton, believes that multilateral and legalistic strategies will become increasingly effective, and necessary, in the 21st century. There will be "no successful international security policy that does not have an active and engaged role for law", he argues. "None of the central problems Bush faces - terrorism, WMDs, precarious financial systems, intellectual property rights, escalating trade barriers - can be solved without law."

The UN stands to be reinvigorated if the US is convinced that it is necessary to achieve its goals. Other countries are already certain of the UN's value to them. To developing countries, for example, it is one of the only institutions through which they can interact with industrialised nations on a near-equal foot- ing. However, these countries often question the dominance of the wealthy states within the organisation. Just like its headquarters, the structures of the UN seem outdated. When it was first founded, the organisation had 51 members; it now has 191. Reform is needed to cater for them, yet any reform is hindered because it requires complex bargaining with each state. Ten years after a working group first looked into changing the membership of the Security Council, there have still been no recommendations.

The General Assembly - where every member has a vote - crams 170 issues on average on to its agenda every year. Despite the equality of decision-making, the secretary general has admitted that "repetitive and sterile debates crowd out items that really matter". The opposite is true of the Security Council, Annan has said, which often makes significant decisions but "lacks legitimacy in the eyes of the developing world". Its composition "seems at odds with the geopolitical realities of the 21st century".

George Monbiot, in his book The Age of Consent, calls for the transformation of the UN's General Assembly into a world parliament of sorts. Rather than strive to create a monolithic world body, however, perhaps we should, as the academic Grahame Thompson has suggested, "consider the principle of pluralism at the international level, and argue for a range of governance institutions operating at different levels and in different spheres". The UN may have a more productive future as a state-based organisation working among a complex web of regional bodies, international and national non-governmental organisations, as well as activists' forums and other grass-roots movements.

The UN is likely to survive long into the 21st century, broken toilets or not. As Blair has said, if the UN didn't exist, then it would have to be invented. If it were created again, its structures would probably suit today's purposes a little better, but its main problems - such as political divisions and inequality - would no doubt remain. Despite its weaknesses, for an annual cost of what the Pentagon spends every couple of days, supporting the UN is one of the best investments we can make to tackle the challenges of the 21st century.

This is an edited version of an essay that was awarded joint first place in the Barry Amiel and Norman Melburn Trust/ New Statesman New Political Writing Prize 2004, which asked: "Is the United Nations fit for purpose in the 21st century?" The other winning essay will be published in the NS shortly