The Catholic Church boasts to be the oldest institution in the Western world, dating back almost 2.000 years. It is currently the largest religion in the world with a staggering 2.4 billion members, roughly 31% of the world's population. Given its priceless art, vast lands, gold and investments all over the world, the Church is one of the richest institutions on earth, and its power has been growing almost constantly since 313 AD when Catholicism became the official religion of the Roman Empire.
The creation of the indulgence letter - a letter of forgiveness for your sins - has undoubtedly been one of the greatest catalysts for the Church's survival and influence. The sale of indulgences generated so much money in the 15th and 16th centuries that it alone financed the opulent Sistine Chapel and St. Peter's Basilica in Rome. However, the path to riches has been bumpy, and the church has repeatedly been on the verge of bankruptcy.
The 1920s are roaring on, and mass consumption and capitalism are driving unprecedented prosperity and growth. But in the Catholic Church, there is little to roar about.
Pope Pius XI, the reigning pope at the time, lives in the run-down, leaky and pigeon-infested Lateran Palace. He can hear the rats creeping through the walls, and he worries about how he will pay for even the most basic repairs. A mere 60 years earlier, the Catholic Church lost the Papal States which they had governed directly for over a thousand years between 756 and 1870, covering most of central Italy at its peak. As a part of the reunification of Italy, the Church's property in the Papal States was nationalized. The Church is in desperate need of a saviour to alleviate its budgetary woes.
Mussolini: The turnaround
Before Mussolini rose to power in 1922, he was never enthusiastic about the Catholic Church, and in his youth referred to priests as "black germs". By the time Mussolini came to power, he realized he had to develop a good relationship with the Catholic Church because while Mussolini ruled the political side of Italy, the Roman Catholic Church ruled the spiritual side. Mussolini realized that the two parties could help each other, Mussolini by helping the Church financially, and the Catholic Church by supporting Mussolini's rule to fulfill his aspirations for absolute power.
As a result of this, the Lateran Treaty was signed in 1929 between the Vatican and Mussolini, securing Mussolini the support of the Italian catholic population as the Church publicly endorsed his rule and government. In return, the Catholic Church became the official Italian religion, the church was given sovereign status and the land known today as the Vatican, the church received a third of Italy’s entire annual budget as compensation for the lost Papal States and was guaranteed salary for all priests by the government.
To better understand the Vatican's decision to join forces with the fascist Mussolini, one must understand its motives and philosophy. The Church despised the godless Bolshevism and pursued a traditionalist line against freedom of speech and democracy, a point of view consistent with Mussolini's policies. But most importantly, the political alliance with the fascist Mussolini was an attempt to secure itself, a strategic manoeuvre to strengthen the position and economy of the Church.
The Catholic Church feared a Communist revolution in Europe, alarmed by the systematic effort to eradicate Christianity in Russia after the communist revolution in 1917. The fear led the Church to the view that fascists were preferable to the godless Bolsheviks, and their future alliance with the Nazis was far more ideological than with Mussolini, which was primarily an economic lifeline.
In 1933, the Reichskonkordat, the pact between the Catholic Church and the Nazis, was signed granting tax breaks and freedom to practice Catholicism in Germany. In addition, the Nazis collected a 10% payroll tax on all Catholic Germans on the Vatican’s behalf, raking in enough money to pay for almost all the Vatican's operating expenses. Hitler, on the other hand, received the endorsement of the Catholic Church, a major catalyst in his rise to power, as the church was the first foreign power to recognize Hitler as the sole ruler of Germany.
The Holocaust represents one of the most sinister periods in the history of the Catholic Church, as German priests actively assisted the Nazis by submitting parish church records to identify Jews. In fact, after World War II, when the true wickedness of the Nazis was exposed, the Church encouraged its members to help Nazi war criminals escape to Argentina. The catholic and anticommunist Argentina led by neo-fascist Juan Perón was considered the Nazis' “Cape of Last Hope” after it became the primary destination for fleeing Nazis facing trial.
It is believed that prominent Nazis, including Adolf Eichmann and Franz Stangl, escaped to Argentina with the help of the church's “ratlines” (a system of escape routes for Nazis and other fascists fleeing Europe in the aftermath of World War II). Even Joseph Mengele, known as the “Angel of Death” following his inhumane and deadly experiments in the Auschwitz concentration camp, is believed to have escaped to Argentina through parts of the church's ratlines.
The Vatican Bank
Despite the strong geopolitical alliances fostered by both Pope Pius XI and Pope Pius XII, none was as pivotal to the Vatican's economic revitalization as Bernardino Nogara, the Vatican’s chief financial wiz between 1929 and 1954. In 1942 during WWII, Bernardino Nogara convinced Pope Pius XII to create The Institute for the Works of Religion, commonly known as the Vatican Bank, best described as a hybrid between an aggressive investment bank and a central bank of a sovereign government.
During WWII, when Italy was under economic embargo by the United States and its allies, the Vatican enjoyed its sovereignty and, as a neutral institution, had the right to enter into transactions with the US and its allies. This provided Nogara with a huge competitive advantage and made it possible to diversify the Vatican’s investments out of Italy, minimizing the catastrophic impact of Italy losing the war.
The sovereignty, awarded by Mussolini, provided the Vatican with great economic secrecy, allowing wealthy Italians to move wealth out of Italy during WWII without the Italian government knowing. Even after the war, Nogara strategically placed large investments in the war-shattered Italian economy, reaping the benefits of the aid given in the Marshall Plan.
By the end of the 1960s, Italy's reconstruction was coming to an end and the Vatican Bank was forced to find new sources of income. The Vatican decided to move away from active investment in the rebuilding of Italy to a more passive investing strategy, moving investments away from Italy.
At the same time, The Vatican Bank exploited its status as the world's best offshore bank, as it was not under the control of any central bank authority in any country. The Vatican’s dealings became increasingly reliant on Mafia money-laundering, connecting them to shady Swiss bank accounts and ghost companies in tax-haven like the Cayman Islands. The Vatican Bank had more than 11,000 accounts in 1978, but only 1,000 of them belonged to Catholic organizations, highlighting the extent to which dirty money moved through the organization.
During the 20th century, the Catholic Church was accused of blackmailing, corruption, financial irregularities, money laundering, and silently legitimizing the most sinister forces in WWII. Although the Church's moral obligations were not met, its economic and political ability to manoeuvre in the chaotic landscape of the 20th century is unmatched. The Vatican is not merely a church, but in the 20th century emerged as a powerful and effective political actor, rising from bankruptcy to become the 18th richest country in the world per capita.
Although the Italian scandalous spirit is embedded in the Church, it continues to be spiritually, politically and economically relevant.