Money and the Rise of the Modern Papacy: Financing the Vatican, 1850-1950. John F. Pollard. Cambridge University Press. [pounds sterling]48.00 (US$85.00). xx + 265 pages. ISBN 0-521-81204-6.

Vatican finances are no small matter. The Protestant Reformation that decisively split Western Christendom was sparked by Martin Luther's outrage at the Church's sale of indulgences--the remission of penalties for sin whether before or after death--in order to finance the rebuilding of St Peter's in Rome. That particular instance of financial mismanagement still resonates half a millennium later with the world's two billion Christians now divided roughly equally between Catholics and non-Catholics.

At first sight, however, a book about Vatican finances that ends with the year 1950 sounds suspiciously like a contemporary irrelevance. It is, after all, the Vatican's more recent involvement in dubious financial deals such as the Calvi Affair that has brought the issue to life. But such an interpretation would fail to take into account the fact that the Vatican as we know it today with its papal personality cult, massive financial power, and a Vatican City that attracts millions of pilgrims from round the world has its roots in the period covered by this work. It is, in fact, Dr Pollard's contention that the Catholic Church's transformation from a small, semi-feudal territorial state in Italy with a fairly loose spiritual authority to a highly-centralised and autocratic organisation with almost undisputed control over its faithful both paralleled and profited from its financial metamorphosis from Italian landlord to capitalist holding company. Money and power, it seems, go together.

Yet, in what must surely be one of history's most felicitous ironies, the proclamation of Papal Infallibility in 1870, which proved to be the foundation of the Church's universal domination, occurred just weeks before the loss of its lands, essential finances, and power base to a new unified Italy. But, just as every failure can act as a springboard to future success, so did the Vatican profit from its misfortune by gradually learning to exploit its assets more effectively. Indeed, the destruction of the 1,000-year-old pontifical state to rising Italian nationalism proved a blessing in disguise in more ways than one. In the first instance, this was because henceforth the Vatican relied increasingly on mobilising donations from Catholics everywhere, and particularly from those in the New World of America, who responded more than generously to its now-manifestly needy condition. Previously, it had relied on loans from Jewish bankers to stave off bankruptcy. Secondly, its determination to hold out for full compensation for its territorial losses from the Italian state finally paid off in 1929 with a payment worth around $90 million at the prevailing exchange rate.

It was this money that was used to buy blue chip investments in the USA and to build the Vatican City that has since attracted so many high-spending pilgrims. Ironically, at the same time that the Vatican was learning to trust world capitalism with its money, it was also taking advantage of the Pope's Infallibility to issue regular encyclicals--pronouncements on ethics to the faithful--denouncing capitalism. It was definitely a case of 'Do as I say, not as I do'. As Bob Dylan commented once in a song: '... money doesn't talk, it swears'. Dr Pollard, a Cambridge don who has previously written about the Vatican and Italian Fascism, does deal with the accusations of hypocrisy, but his contention that the 'curious blindness' of the Popes on this issue 'was almost inevitable given the lack of notions of an ethical investment policy before the 1970s', treats ethics as if it were a matter of fashion.

The author does not pull his punches, however, when it comes to the Vatican's investment in munitions firms supplying arms for Italy's various imperialistic wars in the first half of the twentieth century. But he also details the truly massive amounts donated by the Vatican to relieve suffering from both World Wars and numerous natural disasters. What's more, there seems little doubt that Catholics are much happier when the Church assumes a strong line on political events and that doesn't come cheaply. In the end, Dr Pollard adopts a philosophical position in stating that when the Church did not make the most of its money it was accused of wasting opportunities and when it did it was accused of capitalist speculation. Damned if you do, damned if you don't.