The Vatican lost power during the unification of Italy when it was forced back and confined to a small border at the edge of the city. Prior to that, it was Napoleon whose French armies temporarily defeated the Vatican and brought sanity to what is now southern Italy. Before the Vatican lost power, they were confining Jews to ghettos and removing their merchant rights much like Hitler would later do (the men even had to wear embarrassing hats and a yellow Star of David in said ghettos, yellow being the colour of shame at the time); they were killing their own citizens left, right and center for heresy and suppressing all knowledge of the sciences that ran contrary to their God-centered universe. (It was around the time of Galileo's trial.) The Vatican ruled through fear and when the opportunity arose they were struck down by the impetus of a newly forming country made by people who were fed up with theocratic rule.
Your logic therefore does not completely follow. The Vatican did not aybdicate due to modernity but rather under force. There are many modern Catholics, in the billions actually, who live in urbanized areas. Many are even educated in modernity and have more moderate views, but if you are raised dogmatically then it's hard to completely reform. The Vatican itself still rakes in billions of dollars annually and holds priceless treasures, tomes and artifacts from 2000 years of rule, as well as the profits of war and gifts from state rulers like Hitler. You're making it seem like the Vatican is irrelevant but it's not. They hold political conference with world leaders all the time. The Pope has more access to leaders than the electorate does. The Vatican bank is a major broker in the world economy and they control huge stakes in Europe, much like the other royal families. They are just biding their time in case a political crisis happens where they can takeover rule again. Not likely to happen, but like the monarchs, they exist based on the possibility. In the mean time, they play world politics like they are still acknowledged heads of state.
The inquisition itself didn't end until halfway through the 1800's. The Vatican renamed its office of the inquisition to the Congregation for the Doctrine of the Faith, but it still functions in the same capacity to this very day: ""The proper duty of the Congregation for the Doctrine of the Faith is to promote and safeguard the doctrine on faith and morals in the whole Catholic world; so it has competence in things that touch this matter in any way." (Wiki) Its powers are only limited by its restricted political influence. The Vatican was tamed by Napoleon which brought the liberalization of science and freer thinking to the Italian regions, but once the victory was reversed after Napoleon fell at Waterloo, the Inquisition tracked down all the progressives and killed them - but not before torturing them to find their accomplices. The history of the Vatican shows us that they do not change, they only bide their time.
The Rothschild banking family of Naples developed close ties to the Vatican Bank in the 19th century and that relationship continues to this day. The Rothschilds, in case you don't know, are one of the richest families in the world. They own massive stock and capital assets everywhere, and their influence can shift national economies, especially in Europe.
I think you greatly underestimate the political and financial influence that religion has on today's world. If our secular institutions are ever corroded, religious governance will just swoop back in again. Unlike the laissez-faire attitude of many secularists who think that their freedoms are duely enshrined and permanent, the religious institutions think it is their Divine Right to rule again in order to bring order to an increasingly sinful world. 100 years is not that long, the Vatican has been around for 2000 or so. They can wait, and in the mean time they hold economic and social influence over a lot of people. I don't think this is a good thing, but it is what it is. It's not just people in backwaters whose free thinking becomes compromised, but anyone who can be readily overpowered by someone skilled in dogma.
People of secular mindset need to be aware that the institutions of their freedoms are relatively new, historically speaking. They are built on the idea of justice and the concept of unalienable, innate qualities; but just because we say so doesn't mean another force can't just take them away. They are actually quite fragile and prone to corruptions. Church and State are separate for this reason. The Church operates on Divine Will but secular humanists operate on innate human free will to craft their own destinies.
People, even atheists, really need to understand that the core of a civilization operates upon a spiritual ideology. Society does not wax or wane based on the presence of religion, but on whatever the core spiritual assertion is. If you start to get all subjective and wishy washy about it, someone else is going to come in - who views their beliefs as more concrete than yours - and take away everything that you have. That's why we need to collectively make a choice and then defend it instead of vengefully destroying each other's rights out of spite.
