The Church and Capitalism

Ettore Gotti Tedeschi, the head of the Vatican Bank, on the demographic and financial crises facing the world

Ettore Gotti Tedeschi (CNS)

Ettore Gotti Tedeschi (CNS)

They call him “Ettore il Cattolicissimo”—“Ettore the Most Catholic,” and to one who chooses his hotels based on their proximity to churches where he may attend daily Mass, the nickname is a compliment. Ettore Gotti Tedeschi is the president of the Institute for Works of Religion, informally known as “the Vatican Bank,” a job conferred on him in 2009 by Pope Benedict XVI. In Rome, he dedicates three days out of five to this work, “in a spirit of service.” The two remaining weekdays he can be found in Milan, dividing his time between his job as chairman of Santander for Italy, one of the world’s largest banks, and Catholic University, where he teaches financial ethics.

Spending his life in the seeming contradictions that so obsess the modern-day, liberal Catholic mentality—serving God while having to do with Mammon—how does Tedeschi come to terms with the hopeless plight of the rich, apparently doomed to loitering in luxury on the bad side of the needle’s eye? He explained his position, and more, in this interview with CWR.  

There are those to whom the very existence of something called “Vatican Bank” sounds sinister. In our day of political correctness, we are suspicious towards any and whatever connection between the Church and money. But historically speaking, has this kind of prejudice been a problem in the past as well?

Ettore Gotti Tedeschi: The debate over whether the Church should have money for its needs is at least 1,700 years old. It is mentioned in documents dating back as early as the third century. It was Clement of Alexandria, one of the Church Fathers, who first wrote about it, in presiding over a dispute about whether the Church should or should not have money. Basically what he said was that, of itself, wealth is neutral—what matters is how it is accrued and for what it is used.

Surely that reasoning should have been conclusive?

Tedeschi: Actually, no. The debate went on for centuries even after that. In the Middle Ages it was discussed by the Franciscan friars, who dedicated themselves to explaining the laws of the economy. It was discussed after the discovery of America, when Dominicans, Jesuits, and Franciscans of the School of Salamanca laid out the rules of modern-day economy. It was discussed during and after the Council of Trent. And above all it has undoubtedly been at the forefront of discussions in the last 300 years, after the French Revolution and Napoleon Bonaparte’s conquest of Italy, which began the so-called “Matter of Rome,” calling into question the temporal power of the Church.

You mean that issue came up half a century before the unification of Italy under the House of Savoy?

Tedeschi: Yes, since the first to confiscate the property of the Church [in Italy] was Napoleon. And although it was given back with the Congress of Vienna, there were renewed attacks up until 1871, when Rome was taken over once and for all. On a political level it was not until 1929, with the Lateran Treaty between Italy and the Holy See, that a form of indemnity was agreed on.

Most people don’t realize how huge a confiscation this was, regarding not only the property of the Holy See, but also of the many different religious orders, both male and female, from the Jesuits to the Franciscans. And for years after that, they were all prohibited by law from owning anything. Did the pontiffs involved in these events leave any teaching on the subject?

Tedeschi: Of course. Just think of the role Pope Pius IX and Leo XIII had with respect to the issue of temporal power versus spiritual power. From an economic point of view, both Pius X and Pius XI also repeatedly confirmed that resources need to be available in order to maintain the independence of the Church as an institution, and to enable it to carry out its mission.

It is an issue at the heart of Church teachings, then.

Tedeschi: It’s a matter of communication best left to the popes: too meaningful, too important to leave to anyone less. But by analogy a scholar who would like to work on this issue could think of it in terms of a family. It’s the same thing. A family, to guarantee its independence, needs to hold on to its savings, investing in a house or other property of some kind.

This goes for individuals, too. People produce wealth that can be spent, saved, or invested, thereby creating the purchasing power essential not just to meeting their current needs, but also to providing a possible defense against future events, and for good works in general.

You know the Italian saying, “Money is the devil’s dung.” But as Cardinal Giacomo Biffi once said, it can also be used to fertilize the vineyard of the Lord.

Tedeschi: Wealth is, of course, a means, not an end. Of itself, wealth is neutral, but it can be used to the good, as long as it has been produced lawfully.

What about wealth distribution? This is the aspect that is normally highlighted today.

Tedeschi: Yes, but that comes later. First, in order to put anything to good use, you must have it, it has to exist. You have to make money before you can distribute it. If we are not just talking about attitude, about how one should feel about helping one’s neighbor, then we need to see to producing resources before talking about how to distribute them. Otherwise, what we are distributing is…poverty. This, at least, is my opinion.

An opinion that many would consider to be typical of a Protestant mindset.

Tedeschi: This may be true for some people, but not in my case. They are reflections that belonged to the Catholic world, long before Weber’s famous book The Protestant Ethic and the Spirit of Capitalism. These considerations were expounded in the writings of the Franciscans of the 12th and 13th centuries, as well as in the meditations of the monks at Salamanca, which were to influence the Austrian school of thought in economics.

What is the difference with Max Weber’s reasoning and the Catholic understanding of these issues?

Tedeschi: Weber interpreted the birth of capitalism in the Protestant world according to a very interesting and logical analysis which, regrettably, has been registered in history books as the sole truth about the birth of modern-day economics. Basically, what Weber says is that the humus, or intellectual environment, that engendered modern capitalism, with the Industrial Revolution, was to be found in the so-called Protestant world. In his opinion Catholic teaching created an attitude toward eternal life, based on an immanent vision of the supernatural, that deprived the Catholic mindset of the energy necessary to forge ahead with industrial development.

This claim, that the energies that produced capitalism were spawned by the Protestant milieu, has led to a rather partial and therefore warped interpretation of history, which has come to be the only interpretation around.  But, of course, I wasn’t there in 1905 to discuss things with him!

As to capitalism, you are quoted as saying, “If there were a real, ethical economic development, not a ‘turbo-capitalist’ one, we would see the collapse of poverty.” Are you sure you’re not making up excuses for the world’s crisis?

Tedeschi: I don’t recall ever using the expression “turbo-capitalism,” which I don’t like. It makes capitalism sound like a bad word, while, again, capitalism of itself, like money, is neither good nor bad. Just as free markets are neither good nor bad of themselves. It depends on what you do with them.

If by turbo-capitalism one means the system set in place in the past 25 years to sustain a debtor gross national product, [moving away from] an economic system that used to produce savings to one that produces only consumption, I agree: down with turbo-capitalism! But only because it’s the wrong type of capitalism.

The capitalism that works is the system that makes the most of human industriousness and creativity, which are the building-blocks of capital.

In other words, economic growth is necessary to fulfill the goal of wealth distribution.

Tedeschi: Development and distribution go hand in hand. Wealth distribution is the third of the three great, true goals that should be at the heart of every economic system, and which every economist should keep in mind. These goals are: first, to use resources which are scarce, in such a way as to achieve maximum value, and as efficiently as possible. Secondly, they should ensure economic development, considering people not just as intelligent animals but as beings endowed with a soul and a body, whose satisfaction can not be merely material. This should mean taking into account their spiritual needs and affections and what they believe in, as well as what they want to achieve. Then we come to the third goal, which is to distribute wealth, based on the principle that in order to stay rich, everyone must be rich. If the wealthy party makes everybody else poor, he or she is bound to become poor too. 

Yet, according to some analysts, human selfishness inevitably leads people to concentrate wealth in the hands of just a few.

Tedeschi: Actually, hoarding wealth isn’t selfishness, it’s stupidity. Just think about it: whether you produce cars or books or newspapers, when is it that you get rich? When people buy a lot of cars, or books, or newspapers. This can happen only when everyone, or at least most people, have purchasing power. So when everyone is rich on average, they will buy two cars, whole libraries, six newspapers a day…. But people living at a level of minimum subsistence will resort to buying a used car and only one newspaper, on Sundays, when they have time to read.

This is why one can’t stay rich if there are only two or three in his or her community who are rich. Only in authoritarian countries with vast natural resources, all of which are in the hands of only one or two families, can poverty remain side-by-side with isolated wealth. But in a globalized world, in a democracy which is truly democratic, including in its social relationships, such an imbalance cannot endure. Democracies create the environments that allow the laws of economics to have full play, so if a rich person makes everyone else rich, then he or she can stay rich too.

This must be why, in an interview, you once said: “To be rich is not a defect, to be poor is not a merit.”

Tedeschi: Here I was making a rather paradoxical point. How can a rich man get to heaven, if it is as impossible as a camel’s attempting to get through the eye of a needle? To answer this we should first of all ask ourselves what it means to create wealth. Man, who was born to work, but also to think, if successful in thinking and working, produces results, which are called wealth and progress. People have different kinds of aptitudes, some more obvious and some less.

We are not all alike.… Just think of artists, musicians…it’s a matter of natural gifts. Among the possible talents there are those of the businessman who knows how to manage an idea, formulating it in a product and translating it into the ability to produce wealth, to create jobs, to advance well-being and innovation. I say that this gentleman has in himself something of the saint, something grand, which not only should not be discouraged, but ought to be actively supported. This is why I think that many businessmen are worthy of beatification! They have created wealth, which is also of service to those who do not have this talent, helping them to better their lives.

A reminder that Jesus’ teaching on the camel passing through the eye of a needle, in the Gospel according to Mark [10:23-27], ends with the words, “By human resources it is impossible, but not for God: because for God everything is possible.”

Tedeschi: Yes, the Gospels must be read in their entirety. Christ relied on the rich, from the well-to-do women who supported him, to the Apostle Matthew, who was a tax collector, to Zacchaeus, who gave up half of his property to the poor. Notice also that the rich man of the parable in the Gospel according to Luke did not go to hell because of his money, but because he would not even let Lazarus in to fill himself with what fell from his banquet table.

In short, wealth should not be looked upon simply as a means to satisfy one’s desires, but above all as something that allows you to turn to your neighbors and say, “What can I do for them?”  

So there is nothing wrong with being rich person, if you are someone who knows how to produce wealth, produce it well, create jobs, and thereby achieve the distribution of wealth.

Tedeschi: Speaking once again in paradoxes, what a rich man must do to become a saint is to…become even richer. Because this implicitly means that he will produce more value and well-being for the common good. In providing work for others I sanctify myself. This is obvious.

If we do not agree on this conclusion, it is because we don’t agree on the premise, that to be rich is not, of itself, a shortcoming.

While we are on the subject of business and sainthood, what about banks?

Tedeschi: Banks are the necessary intermediaries of loans, which are indispensible for the growth of economic initiatives. I don’t think there can be any doubt as to the importance of banks in the realm of economic development, since credit is a necessary resource.

As to their role in the current economic crisis, that is another matter. But I believe the explanations that are normally and immediately put forth with respect to banking (greed, excessive intervention in granting credit, lack of rules, etc.) are not enough to explain what happened.

To some critics, consumer banks are responsible for the indebtedness of the poor.

Tedeschi: Credit and lending, of themselves, are neutral. Money is neutral. It is man who makes it good or bad. Think of a couple who wants to get married, or of someone in need of hospital care or of a car to get to work. Consumer credit allows people who currently do not have the means they need to do good things—work, marry, cope with a serious situation—to avail themselves of these resources in view of their future income. I repeat: to the purpose of doing good things. We should realize what we are doing when we continue to look at the world through the warped lenses of those who always and by any and all means work to tear down a system and destroy a forceful idea.

In this line of reasoning, luxury goods are also defensible.

Tedeschi: Luxury goods…yachts, for example? Are yachts good or bad? Let’s be sensible: a yacht creates jobs for workers that produce yachts: so to them, for their lives, yachts are a good thing! Who cares whether the workers or craftsmen who build yachts can’t afford to buy one themselves? Does everybody need a yacht? I, for one, don’t own one, not even a tiny one. I never have. The meaning I give to life leads me to give importance to other things. I have no yacht, but what I do have are the things that I deem important in life. I have a family, with five children.

Won’t this free market thinking get you in the crosshairs of the environmentalists? As you know, not only are they emphatically against people buying a yacht and two cars, but some would appreciate people doing without anything at all that is powered by energy.

Tedeschi: I see what you mean, but as you know, the true environmentalist is he who does not even want mankind to exist. It is human beings who pollute, now, isn’t it?

Yes, indeed.

Tedeschi: Yet this, too, is a mistaken way of reasoning. It is the developed economies that are capable of creating technologies that allow for ecological progress. In the 19th century, when there were a lot fewer people in the world, pollution was much greater and standards of living, from an environmental point of view, were impossible everywhere, not just in the city but also in the country. This situation changed only when economic development allowed it to change.

The greatest and most sustainable economic development started, then, in the West, and lasted as long as the population kept growing naturally; that is, up until the 1960s. Since then there has started to be an imbalance from the point of view of productivity.

Which leads us to your findings as to the origin of the current crisis.

Tedeschi: I have tried to study how the Western world ended up in this economic crisis from its inception, and have come to the conclusion that the causes are to be found in the decline of economic development, coupled with the increase in the cost of old-age pensions. The drop in the world’s gross domestic product was the result of the dramatic drop in the birth rate of the Western world.

The West, meaning Europe, the US, and Japan, has always been the driving force of the economy of the entire world, so there was bound to be an adverse effect on the world’s economy when the rate of population growth collapsed, going from 4-4.5 percent, which was the average rate up to the mid-1970s, to zero growth. This has entailed not just a reduced rate of development, but an increase in the fixed costs of society. When the replacement rate no longer kept up with the increasing burden of the aging population, the West found itself having to cope with unexpected costs.  

So what is the way out now?

Tedeschi: As Pope Benedict pointed out in Caritas in Veritate, the origin of this crisis was of a moral nature: it lay in the denial of life. The only way out of the crisis now is for families to be once again open to life, to having more children.

How can people be expected to accept such an idea, after decades of being hammered with the notion that the world is perennially on the brink of a catastrophe due to population explosion?

Tedeschi: In the 1960s we were told that if we didn’t have children we would become rich. Now we see that the exact opposite has happened: we have become poorer. In those years neo-Malthusian theories were rampant, and people were persuaded that if the population continued to grow unchecked, by the year 2000 hundreds of millions of people in Asia would starve to death. Today we see that nations that were supposed to starve to death have become richer than we are and are the ones that support our economy, thanks to the growth of their populations.

But even then, in 1968, Pope Paul VI wrote in Humane Vitae that economic development could not avoid taking into consideration the value of man and therefore of life.

What if the population doesn’t increase?

Tedeschi: Then the only way to drive up the GDP is to drive up consumption. This has already been attempted, by means of injections of technology and productivity, followed by delocalizatons.

But even maneuvers aiming to increase productivity can only go so far—they too have a maximum limit, and even have the potential to lead people to stop working, which is when a worker becomes merely the controller of a machine. Machines yield a productivity of 100 percent.

We must ponder what balance productivity can ultimately reach, in order to achieve a system capable of growth.

In any case: confronted with the inflexible costs that were on the rise with the aging population (health care, retirement pensions…), the only change that took hold was an increase in taxes. In the last 30 years, on average the burden of taxes with respect to GDP has doubled. This goes a long way toward explaining why a married couple of professional workers earns today, in terms of real purchasing power, less than a father earned by himself just 30 years ago. Nowadays two people need to work to produce the same income that used to be available to only one. Hence the role in society of the family, of children, of women, is dwindling and the principle of subsidiarity is being turned on its head.

The face of the world, east to west, has also been changing.

Tedeschi: That is because one of the ways the West has been trying to cope with the crisis has been to start producing in Asia, in order to be able to lower the prices of goods and thereby increase their customers’ purchasing power. This is called delocalization, and has symbolically split the world in two: we now have the so-called Western world, which used to be rich and spent too much time consuming rather than producing (a fact that is acknowledged by all, whether industrialists, bankers, or economists), and on the other hand we have Asian countries that produce and do not, as of yet, consume. We didn’t actually realize what we were doing until the economy failed and the crisis broke out

What has delocalizing entailed?

Tedeschi: A world of nomads, in which work has to be found where it’s at. It no longer “comes” to workers in their neighborhoods, it is workers who have to go looking for it. People have to move around, including those who were not used to doing so. One wonders, then, from a sociological point of view, if this is man’s purpose in life. Running after work means breaking the fabric of family and social life and being constantly on the move.

Look at China. Chinese laborers go wherever work is to be had, whether it be Europe or Africa or any other part of the world. The Chinese are used to it. It is also a custom of the North American world, where individuals live a sort of independence from their families. We Europeans, instead, and above all we Italians, have always had a strong moral and social view of the family. It is we, perhaps, who suffer most from this new situation.

So which is the best solution?

Tedeschi: I just wonder where man’s best interests lie. Does one’s welfare consist simply in possessing more things, more money? What is the life that makes sense? What are the true values we should refer to? You find the answers to these questions only when you ask the one and only, true and tremendous question: “What is the meaning of life?” This is what can motivate and lend significance to one’s actions. The answer cannot come from economists, nor businessmen, nor social scientists, nor psychologists, nor politicians. The answer can only be given by priests. Priests have the right and the duty to explain life’s meaning. 

So let us rediscover prayer. And Catholic doctrine. Otherwise all discussions are sterile and are destined to come to nothing. Only religion can explain the nature of good and evil. And Christianity is the most rational religion there is.

Critics, of course, would refute that statement by pointing to Church dogmas.

Tedeschi: Even dogmas have been the object of discussion over the centuries, in dozens of councils. Christian theology is founded on logic, on Aristotle, and it forces people to think rationally. Why did God create us? What does he expect from us? The mystery is not forced on us….

There are still priests who teach Catholic doctrine. But many don’t.

Tedeschi: Exactly. Let’s hope that the latter listen to Pope Benedict XVI, who keeps harping on the educational emergency, which this great Pope—we have a truly great Pope, may God give him many more years to shoulder the burden of the problems of this world—has called attention to more than anything else. He singled it out at the very beginning of his pontificate and he continues to refer to it as the key emergency of all. In his third great encyclical, Caritas in Veritate, the Holy Father suggests that if instruments such as politics, economics, law, medicine, all the sciences become autonomous from a moral point of view, in the nihilistic sense that they no longer refer either to a basis in truth or to a goal to be achieved, these instruments are bound to eventually turn against mankind itself. A tremendous responsibility for our generation and for the generations of the future.

About Alessandra Nucci 25 Articles
Alessandra Nucci is an Italian author and journalist.