The Economic Ideas of the Vatican
Prof. Dr. Hans Frambach / Economic Science
Photo: UniService Transfer

"A poor church would sink into insignificance in today's world".

The scientist Prof. Dr. Hans Frambach on the Vatican's economic ideas.

What if the church of the poor were actually poor? What if all church goods were sold and benefited the poor? What if then all pastoral activities were suddenly no longer financially viable? The Vatican is rich, the Catholic Church is rich, without question, it increases its assets from day to day and does not tire of calling the whole world again and again not to forget the poor. Prof. Dr. Hans Frambach, an economist specializing in microeconomics and the history of economic thought at the Bergische Universität, together with co-author Daniel Eissrich, has examined the social encyclicals of the Holy See in the book "The Third Way of the Popes - The Economic Ideas of the Vatican.

A Christian-oriented path of its own

In its social encyclicals, the Catholic Church has always called on society to show more solidarity with one another and formulated its own ideas on economic development. "With the term 'third way,' we give a paraphrase for one of many attempts to establish a conception of order, a middle way between the two extreme forms of pure economic liberalism and an order of centralized control," the scholar explains. There have always been attempts to find free-market or planned-economy middle paths in economic regulatory policy, he said. "However, since the first social encyclical 'Rerum novarum' in 1891, which was followed by many social encyclicals, the Vatican had described its own 'mediating path' located between the extremes, which, in contrast to other third paths, foregrounds an orientation toward Christian values."

How rich is the Vatican?

But how does a business enterprise that is oriented toward Christian values embark on a new path? Perhaps the first thing to do is to clarify the size of the company in the case of the Vatican. So how rich is the Roman enclave? "One problem in answering this question is that often it is not just the Vatican that is meant, but the Catholic Church in general," Frambach immediately qualifies a correct answer, however, quite officially Wikipedia states that the Vatican's assets are about 13 billion euros, with annual expenditures of about 0.4 billion euros, with the emphasis on personnel costs. A large part of the assets are tied up in land, real estate and buildings, he said. For Germany, Frambach says, there are also figures. "Frequently cited figures come, for example, from political scientist and publicist Carsten Frerk, who, in the wake of the 2013 spending scandal surrounding former Limburg Bishop Franz-Peter Tebartz-van Elst, once told Fokus online and Der Spiegel magazine that the assets of the Catholic Church in Germany amounted to about 200 billion euros."
Author Friedhelm Schwarz takes a hard line on the church as a business, saying, "No business, no political party and no trade union has as much power as the two large churches in Germany. ... The churches repeatedly emphasize their poverty in public. But this is an expedient lie to rake in even more revenue and subsidies, which only serve to expand the influence of the church bureaucrats. The two large churches in Germany today have total assets of around 500 billion euros. They have 53 million members and employ over 1.3 million people in nearly 50,000 independent companies. They generate a total annual turnover of more than 125 billion euros." Frambach does not want to dispute the figures mentioned by Schwarz at all, but emphasizes: "In the many companies owned and operated by the church, people are employed who produce, provide services, generate economic value. In many cases, these are social institutions such as hospitals, hospices, youth and old people's homes. The (Catholic) Caritas, for example, is the largest non-governmental employer in Germany, with nearly 700,000 full-time employees.  Therefore, one must seriously ask whether the world or its citizens would be better off if these assets were in the hands of private companies rather than the church."

The St. Peter's penny

The St. Peter's pence is at the disposal of the Pope himself. Collected each year on June 29, the feast of the Apostles Peter and Paul, for the 'service of love to the needy' worldwide, this collection flushed nearly $57 million into the Vatican's coffers in 2019 alone. For years, this St. Peter's penny donation has been used predominantly to cover the Curia's growing budget deficit and does not reach those in need at all. However, it is not permissible to use donations for taxable, economic business operations. "The St. Peter's penny is officially designed to support the pope in carrying out his 'manifold tasks' and, and I quote, 'his concern for the needs of the universal church and the service of love to those in need,'" Frambach explains. "Time and again, however, headlines emerge according to which St. Peter's pence is used to close budgetary holes, finance opaque real estate deals and speculation. Even though the Vatican itself has launched investigations into suspected fraud, I see the practical conditions, which can hardly be denied, as causing enormous damage to the confidence of donors, most of whom certainly give their money in the belief that it will be used for charitable purposes. The use of funds for improper purposes is, of course, inadmissible."

Francis of Assisi - the pursuit of an ideal

The merchant's son Francis of Assisi is considered the pioneer of the poverty movement. Pope Francis justified the choice of his name by saying that he wanted a poor church for the poor. It's hard to imagine that the head of the Catholics doesn't know about the immense assets, but selling off and giving away these assets would have even a short-lived success, according to Frambach. "If the Church were to use the proceeds to address poverty, on the one hand, credibility would certainly increase," he explains, "but on the other hand, the fundamental problem of poverty in the world would hardly change, at best perhaps in the short term." Rather, Frambach believes that Pope Francis wanted to express with his statement that the Church, or any of its dignitaries, should rather deal directly with the real problems of the poor and poorest in their daily work and be less concerned with issues of self-administration, self-employment and strategic external presentation and networking. The pope sees the life and work of Francis of Assisi as a desirable ideal. "I fear that a poor church in today's world would tend to sink into irrelevance, since it would not even be able to fulfill many of its social missions."

Loss of power follows dogma of infallibility

In his book, Frambach writes about the great upheavals caused by industrialization in Italy at the end of the 19th century, which deprived the Papal States of any more secular instruments of power. In parallel, Pope Pius IX promulgated the infallibility dogma during this period. A coincidence? "I can't really answer that question, since infallibility is a quality that the Catholic Church ascribed to the pope in order to give a final judgment on controversial theological issues," the scholar answers. In any case, in the course of the 19th century, the Papal States had to cede large areas of land in Italy, and with it secular power, Frambach knows. Today, the Papal States 'only' own the Vatican City itself, Lateran and the summer residence Castel Gandolfo. "The assumption that in the course of the loss of secular influence at that time, endless disputes in the theological field should be reduced or avoided as far as possible, is certainly not to be dismissed out of hand," he explains. "The possibility of the issuance of a 'final judgment' by the 'highest authority,' so to speak [infallibility dogma; ed.] certainly presented no inconvenience."

Influence of the Social Encyclical on Social and Economic Policy
The Church recognized the problem of social injustice early on, but did not formulate a real statement until the encyclical 'Rerum Novarum' in 1891. This has had an influence on the social and economic policies of many countries. The direct influence can be seen, for example, in the emergence of the Catholic workers' movement in countries such as Belgium, Germany, France, Holland and Italy, as well as in various charitable and self-help organizations, Frambach knows. This is also due to the fact that Catholic theologians, who were very familiar with the contents of the social encyclicals, sometimes held high political offices or sat in parliaments, where they also tried to implement corresponding demands. Frambach mentions here as representative the priest Heinrich Brauns, who held the office of Reich Minister of Labor in the Weimar Republic for eight years starting in 1920. "There have been very many connoisseurs of the social encyclicals in influential positions. In the introduction of the social market economy in the Federal Republic of Germany, explicit reference is even made to the ordo idea [In the ordo idea, people in the Middle Ages held the conviction that a God-ordained hierarchical division of the world exists in which people naturally live with one another in various relationships of superiority and subordination; editor's note] of Catholic social teaching. But values from Protestantism, liberalism and socialism also played a role. All in all, higher or superior values that can be found in the values of freedom, equality, and justice, which are based on the idea of humanity."
Time and again over the years, social encyclicals have triggered high political waves. Frambach recalls Pope Benedict XVI's 2009 social encyclical 'Caritas in Veritate,' which massively criticized the financial markets, or Pope Francis' 2015 'Laudato Si'' in which he harshly criticized modern capitalist market logic, especially its disastrous consequences for our environment, the basis of human life. This went around the world, because one thing should not be forgotten: "The Catholic Church has around 1.3 billion members worldwide. That is, the ideas of the encyclicals can be communicated relatively easily to a comparatively large audience." Whether it's the priest in the pulpit or the Church's many publication outlets, the reach of these messages is enormous.

This economy is killing

Pope Francis says, "This economy kills," taking as his starting point an idea that the poor are characterized by a special innocence and that they are the keepers of a naive purity not corrupted by selfishness, economic interests, money and individualism. The economic journalist Rainer Hank says: "The Christian faith has pushed capitalism.  They (the poor) are instrumentalized both politically as voters and theologically as church people. If the poor were to leave their misery behind with the help of free-market reforms, this social doctrine would lose its basis and legitimacy. A capitalism that makes the poor rich is disruptive." That the poor are the 'keepers' of a 'naive purity,' however, Frambach questions. "Poverty alone does not make man a better man; it certainly protects him from many a temptation, but I doubt that the poor man, if he were rich, would act differently from the rich man." Pope Francis' much-quoted statement, 'this economy kills,' which he made in 2013 in the Apostolic Exhortation 'Evangelii Gaudium,' refers to the myriad of despicable conditions in modern societies and is aimed primarily at saying that a headline on the stock market receives a higher perception than a homeless person freezing to death, he said. "I certainly agree," Frambach says, "that the so-called 'poor' are disadvantaged in many respects compared to the so-called 'rich,' and there have been and are also many situations in which people have been and are instrumentalized. The accusation, however, that capitalism would deliberately prevent reforms, so to speak, in order not to endanger it or even to deprive social doctrine of its basis of legitimacy, I consider to be downright absurd."  In modern market-oriented economic systems, the primary goal is to reduce social problems. But this is anything but easy, if at the same time personal freedom rights are to be guaranteed, social security is to be ensured, a minimum of prosperity for all is to be given and, last but not least, the environment is to be preserved in a livable condition.

Justified concern about the welfare state

In 1931, Pope Pius XI's social encyclical 'Quadragesimo anno' was published, in which he warns against the expansion of the state into a welfare state. "In it, reference is made to a possible development in which the state would take on more and more tasks, thus becoming ever larger and more powerful on the one hand and exhibiting central administrative elements to an ever greater extent, but on the other hand increasingly depriving citizens of personal responsibility and taking away incentives to perform, indeed downright promoting a kind of taker or entitlement attitude toward the state," Frambach said. "That was a fear that was formulated by the Catholic Church at the time, and it can't be completely dismissed out of hand, because it's about the fundamental relationship between citizens and the state, or about the role of the state, the granting of freedoms and the assumption of responsibility, about the creation of contemporary framework conditions." At the latest with the debate about the state of our environment and increasing acts of war, the topics of world peace, humanity, basic living conditions have come into focus, topics that the social encyclicals have dealt with time and again.

Redefinition of the concept of progress

Again and again, the Vatican exhorts the world to cut back on a sense of entitlement and to take seriously its responsibility to the community. Pope Francis sees the way out in a redefinition of the concept of progress, according to which rich countries give of their wealth to poor countries in many ways, because what is at stake is peace and the continuity of the world, community, humanity and solidarity. "With his appeal to redefine progress, as Francis has done, to integrate, among other things, social and ecological aspects into the concept of progress and to call for more peace, community, humanity and solidarity, the Pope is fulfilling exactly what I believe is his task," Frambach sums up. "By calling on rich countries to show more consideration for the poorer ones - not least because much hardship and misery there has also been caused by the economic practices of the rich states - Francis is taking up one of the, if not the, questions of economics; namely, that of the increasingly unequal distribution of income and wealth, which we are more than ever away from solving. While economists and especially development economists have long been searching for solutions with, unfortunately, only moderate success, I understand the moral appeals of the popes made in the social encyclicals as a different, perhaps not more promising, but in the same, right direction, push to make life on our planet more livable. And for everyone."

Book Recommendation
The Third Way of the Popes: The Vatican's Economic Ideas
Hans Frambach, Daniel Eissrich
UVK Publishing Company Constance and Munich, 2016.
2nd ed.: The economic ideas of the Vatican, utb (UVK Verlag) Munich, 2020

Uwe Blass (interview 02.02.2022)

Prof. Dr. Hans Frambach heads the research area Microeconomics and History of Economic Thought in the Faculty of Economics, Schumpeter School of Business and Economics at Bergische Universität.

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