In his traditional, end-of-the-year speech to Vatican cardinals and bishops, Benedict said revelations of abuse in 2010 reached "an unimaginable dimension" that required the church to accept the "humiliation" as a call for renewal.
"We must ask ourselves what was wrong in our proclamation, in our whole way of living the Christian life, to allow such a thing to happen," the pope said.
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Benedict also said, however, that the scandal must be seen in a broader social context, in which child pornography is seemingly considered normal by society and drug use and sexual tourism are on the rise.
"The psychological destruction of children, in which human persons are reduced to articles of merchandise, is a terrifying sign of the times," Benedict said.
He said that as recently as the 1970s, pedophilia wasn't considered an absolute evil but rather part of a spectrum of behaviors that people refused to judge in the name of tolerance and relativism.
As an avalanche of cases of pedophile priests came to light, church officials frequently defended their previous practice of putting abusers in therapy, not jail, by saying that was the norm in society at the time. Only this year did the Vatican post on its website unofficial guidelines for bishops to report pedophile priests to police if local laws require it.
"In the 1970s, pedophilia was theorized as something fully in conformity with man and even with children," the pope said. "It was maintained - even within the realm of Catholic theology - that there is no such thing as evil in itself or good in itself. There is only a 'better than' and a 'worse than.' Nothing is good or bad in itself."
"The effects of such theories are evident today," he said.
The traditional Christmas speech to Vatican cardinals and bishops is an eagerly anticipated address that Benedict uses to focus the church hierarchy on key issues.
Benedict has previously acknowledged that the scandal was the result of sin that the church must repent for, and make amends with victims. He repeated Monday that the church must do a better job of screening out abusers and helping victims heal.
"It is fundamentally disturbing to watch a brilliant man so conveniently misdiagnose a horrific scandal," said Barbara Blaine, president of the main U.S. victims' group Survivors Network of those Abused by Priests.
She said the scandal wasn't caused by the 1970s but rather by the church's culture of secrecy and fixation with self-preservation in which predator priests and the bishops who moved them around rather than turn them in were rarely disciplined.
"Whenever the pope tires of talking about abuse and starts acting on abuse, he should focus on taking immediate, pratical steps to oust those who commit, ignore and conceal clergy sex crimes first," Blaine said.
The sex abuse scandal, which first exploded in the U.S. in 2002, erupted on a global scale this year with revelations of thousands of victims in Europe and beyond, of bishops who covered up for pedophile priests and of Vatican officials who turned a blind eye to the crimes for decades.
Questions were raised about how Benedict himself handled cases both as archbishop in Munich and as head of the Vatican office that handled abuse cases.
Recently, the Vatican released documentation showing that as early as 1988 then-Cardinal Joseph Ratzinger sought to find quicker ways to permanently remove priests who raped and molested children in a bid to get around church law that made it difficult to defrock priests against their will.
While Ratzinger was unsuccessful then, Vatican rules now allow for fast-track defrocking. But victims advocates say the Vatican still has a long way to go in terms of requiring bishops to report sex crimes to police and release information and documentation about known pedophiles.