The Weird and Wonderful Economy of Vatican City

this is vatican city the smallest widely recognized sovereign state in the world this tiny nation exists entirely within these walls but its influence is felt the world over the roman catholic church is often touted as one of the wealthiest organizations in history with billions of dollars in revenue and trillions of dollars worth of real estate all over the world but nobody can really be sure the roman catholic church vatican city and the ever mysterious holy see are all very strange organizations that don't exist within the typical frameworks of business entities these entities are mysterious by design they have been shaped by centuries of history are extremely private and are filled with contradictions but as always a lot can be revealed by following the money so just how rich is vatican city how does the economy stack up next to other micronations like monaco or liechtenstein and most importantly is this really a country or just some bureaucratic anomaly that was the product of taking a 2 000 year old institution and cramming it into the modern day this episode of economics explained was made possible by our fans on patreon if you like to gain early access to these videos before they're uploaded to youtube as well as participate in exclusive q a sessions please consider supporting the channel on patreon.com economics explained the most important part of understanding the economy of vatican city is to realize that it is not a country in the typical sense sure it has borders a government a military and even a central bank but outside of that it is truly a unique entity the first distinction that must be made is between the vatican city and the holy see vatican city is the country it's what you typically think of it's this area here the sovereign borders of the city within the city of rome this is home to saint peter's basilica the sistine chapel the primary government building of the nation the residence of the pope the central bank of the nation and even an airport albeit a very small one the holy see on the other hand is most easily thought of as some kind of weird corporation and ruling party hybrid but also neither of those things it is an entity that owns vatican city and is ruled over by the pope in the same way this is china it's ruled over by the chinese communist party which is in turn ruled by the chairman of the party it's a corporation in the sense that it also owns assets and does a lot of business internationally under the name of the holy see when china or the united states enters into a trade deal they are not going to sign off on the agreements as the chinese communist party or the republican party they will sign the agreements as the people's republic of china and the united states of america so it's not really a political party and it's not really a corporation when the pope does any work outside the borders of vatican city it will be done under the name of the holy see headquartered in vatican city in the same way google wouldn't sign contracts as 1600 amphitheatre parkway in mountain view california they would sign them as google but they would put their headquarter details on the contracts as a legal requirement if vatican city wanted to install solar panels let's say like they did in 2008 they would need the help of an outside company since obviously the state lacks the resources to produce solar panels themselves these solar panels were installed by a german company and the check was written from the vatican bank for around 10 million euros and signed off by the holy see now to add confusion to all of this the holy see is not a legal registered corporation or actually any official entity of any type anywhere oh and the holy see does own territory outside of the borders of the vatican namely a collection of palaces and basilicas in and around rome as well as the papal palace in the neighboring city and a big old telescope in arizona for some reason these are extraterritorial entities which means they are the sovereign land of italy or the united states in the arizona telescope case but italian and american law does not apply on their grounds similar in almost every way to an embassy to keep things simple vatican city is a country that exists within these borders the holy see is an invisible and hard to define power that acts in mysterious ways and uses the pope as a vessel to communicate with the world the reason that this is really important to the economics of this nation though is that vatican city is the single most internationally dependent nation on earth the nation depends entirely on other nations for its most basic of essentials and other countries and businesses want to know who it is that they are doing business with which is where things get even more interesting the nation's unique relationship with the world one of the most important ways any nation interacts with the outside world is through its currency we have explored the intricacies of foreign exchange markets many times before on this channel but what's important to know here is that having a strong currency is just as important to international trade as it is to domestic trade this is true regardless of the size of the economy and so since its official recognition in 1929 vatican city has managed the circulation of its own currency from its inception the state used vatican lira which were functionally identical to italian lira the currencies could be exchanged one for one and vatican lira could even be used as if it were italian lira anywhere within italy when italia abandoned the lira in favor of the euro in 2002 the vatican tried to follow along but there was a problem you see the european union was very selective about who they let join their little club vatican city did not make the cut for two big reasons one it was just not that significant it would be unfair that this tiny little nation would hold as much negotiating power as say france it didn't bring that much industry to the table and not having vatican city as a direct trading partner was not going to make or break the whole european union deal the second reason was that even if these other countries did want to let vatican city in they couldn't eu regulations stipulate that only democracies can be member states of the union vatican city is a monarchy with absolute governing power residing in the king of the vatican who is the pope now this is a problem because the vatican needs to buy a lot of stuff from italy given that it's totally incapable of producing pretty much anything itself outside of a few boutique industries it could just save up some euros in a regular bank like a corporation might but this still causes issues it would put the wealth of a sovereign nation in the hands of a regular institutional bank which would be problematic at the best of times but when it's also considered how influential the catholic church is it's just not reasonable now regular european nations actually have the ability to print their own euros in the same way that the federal reserve has the ability to print us dollars of course this is all controlled by the european central bank to stop one country printing more than their fair share but member states still have quite a lot of flexibility in how they conduct monetary policy the member countries of the eu primarily italy agreed to let vatican city do this as well if italy got the authority to print 20 billion euros in a year they could pass a small part of this along to vatican city which they did there are actually vatican euro coins they were minted and distributed from vatican city and they feature the impressions of current and former popes just like vatican lira these vatican euros are functionally identical to any other euro and can be used at face value anywhere within the european that accepts euros although they almost never are vatican euros are actually so rare and unique that they are hunted down by coin collectors any vatican euro coins that go up for sale are sold at many many times their face value so they were more or less ceremonial what this did allow vatican city to do though was manage and operate their own bank this bank could manage the transactions that vatican needed to maintain the function of the state without having to be beholden to some regular institutional bank and the bank itself is actually very very interesting the vatican bank which has around 8 billion in assets has often been the center of scandals and corruptions since it was founded in 1942 vatican bank accounts are only supposed to be held by residents of vatican city and other high-ranking church personnel for their own expenses as well as the day-to-day running of the city but according to gerald posner a vatican bank scholar and the author of god's bankers these accounts were often awarded to powerful italian officials looking to stash money without paying taxes alleged corruption aside this whole arrangement with the european union and italy is a great case study in truly understanding the way that vatican city conducts its foreign relations the national economy itself is extremely insignificant but its influence is incredible it's more or less worth it for nations to let vatican do their thing they don't cause any issues and by helping out the vatican the countries of the world ensure that they don't enrage their catholic populations all while potentially stashing a little bit of cash aside for themselves along the way now this influence is actually the nation's greatest asset different nations from around the world have a variety of resources they draw upon we have seen that natural resources like oil and precious metals can be a blessing or a curse a well-educated and industrious population or simply international recognition as a good place to do business can go a long way to developing a prosperous economy vatican city has none of these no resources because well it's a tiny nation its population is actually incredibly well educated but most citizens of the nation are clergy men that are more interested in scripture than making massive profits in terms of a place to do business well it's not like other micro nations like say monaco or lichenstein which are incredibly business friendly you can't set up a business here you can't actually even be a full-time resident of the nation unless you are a pretty high ranking member of the catholic church what's more is that vatican city actually doesn't receive that much money a lot of people assume that the city brings in a huge amount of money from tithes from its churches all over the world and this makes sense the catholic church as an entity has revenues of around 200 billion dollars per year a good chunk of this comes from the united states which is the church's most valuable market by a fair margin although almost none of this money is fed back to the vatican instead it is coordinated for use in charitable works property maintenance and is used in a range of medical centers that are administered by the catholic church in fact the only time the vatican itself gets money is once a year as what is called peter's pence where parishes from across the world will directly pledge money to the pope to do with what he sees fit sometimes this money goes towards keeping the city going but more recently had has just gone towards charitable works in less developed countries these days vatican city breaks even on tourist dollars mostly from people paying admission to see its museums but looking for some massive pile of money or huge secretive industry is really missing the point the economy of vatican city this physical walled area is very small but the economy of the church is very big there are over 1 billion catholics around the world that's a population larger than orbit two of the most populous countries on earth just like regular nations the church is not trying to turn some massive profit or hoard huge piles of cash but rather they are trying to raise revenue and coordinate spending in a way that will benefit their subjects continue their operations and if you want to be really cynical increase their power and influence it just so happens to do this outside of its borders looking at the economy of vatican city is like looking at the economy of the capital building there is basically nothing there but their influence directs some of the largest economic forces in the world so now it's time for the very difficult job of putting vatican city onto the economics explained national leader board vatican city's economy is tiny and while there is a huge level of influence over one of the largest economic powers in the world the actual recognized nation things that fall within these borders can only get a one out of ten gdp per capita is an interesting one the country is only home to 825 permanent residents but most of its activities fall under charitable actions and are therefore not counted as part of gdp but if only the revenues from its museum admissions modest financial services and gift shop are included the nation would have a gdp of around 77 million dollars this gives the country a gdp per capita of 93 333 meaning it's an easy 10 out of 10. next up stability and confidence well this is literally the bastion of faith for over a billion people worldwide so it's certainly got the confidence in terms of stability it's almost entirely dependent on italy for all of its operating requirements which is never a great situation to be in we'll split the difference and give it a 5 out of 10. growth is actually pretty strong since pope francis rose to power tourism has tripled given that tourism is the nation's primary industry this has been great for growth overall it gets a 10 out of 10. finally industry well i'm sorry but the country adds very little in the way of value for better or worse it coordinates one of the most powerful organizations in the world but the bottom line is that a modest tourist industry is not significant on the world stage you can only get a one out of ten this gives the nation an average score of 5.4 out of 10 putting it in fourth place so far with the asterix that a lot of the regular world bank figures we work with to make this list are just not available for vatican city vatican city is often brought up as one of those strange anomalies the smallest nation in the world that's also home to the smallest population in the world shrouded in secrecy but also responsible for ruling over one of the most powerful organizations in the world the economy of the city-state itself is relatively unremarkable but following the money is a great way to garner insight into this enigmatic entity the nation of vatican city is relatively humble in operations but that just depends on what you count as the nation if it's what falls inside these borders it's little more than a fun curiosity if it's the influence that those walls have then it very well could be one of the most powerful nations in the world hi guys hope you enjoyed the latest video if you did please consider liking and subscribing this video was made possible by our patrons over on patreon if you want to have your say about what country or topic we explore next please consider supporting the channel like these awesome people did thanks guys bye

Channel: Economics Explained

Views: 353,916

Keywords: the economy of vatican city, the most powerful micronation in history, what is a micronation, is vatican city a country, the economics of vatican city, vatican city explained, the vatican explained, what is the vatican, the government of vatican city explained, the economics of the vatican, vatican city, the vatican, worlds smallest country, what is the worlds smallest country, vatican city economics explained, the vatican economics explained, economics explained

Id: 7ko3LPb9Mxo

Length: 17min 2sec (1022 seconds)

Published: Sun Jul 19 2020

Reddit Comments

[u/dulead]

This video is kinda sloppy. It calls the Holy See a secret thing that runs the whole show! Even tells the Pope what to do? The holy see is just the authority of the Pope over churches/institues which belong to the catholic church. However he equates the vatician structure to modern day China's, where the pope is the head of it? It simplifies the vaticains role in the EU. It's too sloppy for me to take it seriously sadly :<