Former archbishop of Detroit brought capitalism to city’s budgetary chaos.
Apr 09, 2005
The late Pope John Paul II earned praise for his role in facing down communism. One of Cardinal Edmund Szoka's contributions to the Roman Catholic Church has been an injection of capitalism.
(Wall Street Journal, April 8, 2005) VATICAN CITY - The 77-year-old former archbishop of Detroit is president of the Governatorate of Vatican City, the closest thing this tiny city-state has to a mayor.
Two years ago, Szoka moved the Vatican's department store out of a glum basement and into the former train station, a spacious refurbished stone building behind St. Peter's Basilica. New merchandise was added: high-end perfumes, $3,000 Longines watches and flat-screen TVs from Panasonic.
"The store is doing pretty well," the cardinal says, though he notes there has been a drop-off since year-end sales ended. "Before Christmas, it's fantastic."
In an enclave where prayer and theological study dominate, Szoka tackles traffic snarls, parking problems and especially finance. "My job is basically to run this country," he says. "My biggest problem is maintaining a balanced budget."
Since being assigned to his post in 2001, he has boosted the Vatican's retailing operations, which account for 53 percent of the city-state's annual budget of about $190 million.
Revenue from the Vatican Museums, including admissions and gift shop sales, makes up an additional 19 percent, while odds and ends such as the sale of stamps and coins issued by the post office provide the rest. Without that cash, the Vatican wouldn't be able to pay its electricity bill or the salaries of its 1,500 employees, including 63 full-time gardeners.
"Everything else," says Szoka, "is all costs."
The Vatican's struggle to make ends meet dashes one of the enduring myths about the church - its tremendous wealth. Certainly, the Vatican is stuffed with mind-boggling treasures. Its museums are 8filled with Michelangelos, Leonardos and Raphaels. The value of St. Peter's Basilica is astronomical. But the Vatican has no intention of ever selling its masterpieces. In fact, it lists all its priceless works of art, including the Sistine Chapel, on its books at a nominal value of 1 euro each, as a way of indicating it prizes their religious and artistic significance over their financial worth.
Tax-free shopping
Today, one of the Vatican's most lucrative sources of income is a two-pump gasoline station about 50 yards south of St. Peter's. Cars pull up in a steady stream to fill their tanks with gas that costs up to 30 percent less than it does in Italy because it isn't taxed.
Duty-free shopping is one of the few economic benefits the Vatican can offer its 1,500 employees. Another 2,500 people who work at the Roman Curia, the bureaucracy that does the business of the Catholic Church, also have access to the Vatican's shops. Salaries at both are low compared with pay scales in Italy.
Still, a steady job at the Vatican is considered prestigious in Rome. Each year, more than 4,000 applicants shoot for a handful of empty spots. Few ever quit their jobs, and firings are extremely rare.
"It's not like the auto industry," says Szoka, a native of Grand Rapids.
The Holy See and the Vatican have endowments that are invested very conservatively and generate modest returns, say advisers to the church. The Holy See's budget is handled by an office called the Administration of the Patrimony of the Apostolic See, known by its Italian acronym, Apsa.
The office doesn't publish financial figures. But it's estimated that Apsa's total budget is roughly $250 million, a sum which must cover the salaries of 2,500 employees of the Roman Curia. Most of that money comes from the return on its investments, from several hundred apartments it rents out in Rome, many at a below-market rate, and from contributions from local bishops' conferences. The American bishops kick in about $8 million a year, for example.
Szoka's calling
Szoka was first called to the Vatican in 1990 to help straighten out the finances. In Detroit, he had developed a reputation for openness and had been an effective cost-cutter. He closed or consolidated 30 parishes to keep his diocese running at a time when jobs in the local auto industry were disappearing.
When he was appointed to head the Vatican city-state in 2001, he found another headache awaited: traffic. "It was a mess here with all those cars," he says. Though there are only a few streets in the hilly Vatican enclave, they were often clogged. Some people were taking a shortcut through the Vatican to avoid the Roman 8gridlock outside, which enraged the cardinal. He tightened traffic laws and oversaw the construction of two underground garages to ease congestion.
Though fewer than 500 people live inside the Vatican, Szoka must supervise all the functions of a microstate. That includes managing the Vatican's efficient post office, issuing passports, and dealing with a state pension system that he describes as "underfunded." "We're going to have to add a good chunk of money to it," he says.
Future unknown
That's not a job that Szoka is likely to complete. Vatican employees are subject to mandatory retirement at age 75. He submitted his resignation to the pope upon reaching that mark two years ago, but was asked to stay on. Now, as the leadership of the church changes, there will be a new opportunity to re-evaluate the church's conservative approach to investing.
One of the effects of that strategy has been to stash most of its money in dollar-denominated assets, even though the Vatican and the Holy See keep their books in euros. The Vatican doesn't like to quickly move its money in and out of investments, preferring instead a system of stable, steady returns. The depreciation of the dollar against the euro has hit the church hard, Szoka says.
"It's not my money; it's the money of the Holy See. And because of that responsibility, I feel that I have to deal with it in a very conservative manner," he says. "If it were my own money, personally I would be much more aggressive."
Former archbishop of Detroit brought capitalism to city’s budgetary chaos.