The Pope’s AI Encyclical Marks the Triumph of Social Capitalism Over Neoliberalism: Part II

Echoing social capitalism, the encyclical gets technology and employment wrong, succumbing to the lump-of-labor fallacy and short-term protection over long-term progress.

Part I of this post discussed the overall message of the recent papal encyclical on AI and how it channels the new dominant social capitalist ideology. This part will discuss the encyclical’s writings about the capitalist economy, work, AI, and workers.

Pope Leo XIV writes:

Leo XIII’s Encyclical Rerum Novarum constitutes a milestone in the development of the Church’s social teaching. The document places the dignity of work and of workers at the forefront of its reflection; affirms the right to a fair wage for oneself and one’s family; recognizes that persons have a fundamental value that takes precedence over capital and profit…

It presents fair wages as the concrete means of verifying the justness of the entire socioeconomic system because they reveal whether the worker is treated as a person or merely as a cost of production. Work is not considered simply as a problem to be dealt with or a means of generating income, but a fundamental good for the person, a principle of economic activity and the key to the entire societal question.

This is a wonderful aspiration, and one that AI-driven productivity might eventually achieve, perhaps in 50 to 100 years. But throughout human history, including now, work has had to be a means of generating the income necessary to buy needed goods and services, not a means of uplifting the spirit.

Without work, there is no output. Without output, there is widespread immiseration. There was no choice. A society of worker-owned cooperatives would have produced outcomes no different from, and possibly worse than, those of a capitalist system.

The encyclical goes on to say:

Through work, human beings bring their freedom, creativity and capacity for cooperation into play, contributing to the cultural and moral elevation of society. In light of this, the various kinds of job insecurity, fragmented career paths and automation must not be evaluated solely in terms of efficiency, but in relation to the dignity of the worker, the right to sufficient remuneration and the genuine possibility of participating in society.

But the reality is that there are many less-than-fully satisfying jobs workers have to do because, without them, society wouldn’t function. Garbage collection is a tough, backbreaking job. But thankfully, we have workers willing to perform this critical task in exchange for pay. The development of AI-guided autonomous garbage trucks is a way to relieve that burden. To be sure, it would require garbage collectors to find new employment, but in their new jobs, their working conditions would likely be safer and their quality of life would likely improve.

The encyclical addresses a fair wage. Is a wage of 40 cents an hour with only a 4 percent rate of profit fairer than a wage of $40 an hour with an 8 percent profit rate? If so, why? Wages were low 100 years ago, not because of the selfishness of capital, but because of the paucity of technology and the resulting low productivity.

It’s one thing to talk about boosting the minimum wage—something Democrats should have done when they controlled the White House and both chambers of Congress. But it’s very different to believe that if the minimum wage were $40 an hour, this would translate into that income in inflation-adjusted dollars. It would not.

Related to this is the view in social capitalism that companies should not be focused on profits or productivity. Pope Leo XIV writes that while many of the historical conditions described by Leo XIII have changed, “at least two insights remain highly relevant today: the primacy of human labor over any mindset focused solely on finance or productivity.”

I agree that over-financialization is a problem. But productivity and profits are not. Without productivity growth, we would all be paupers and peasants. And without profits, companies would not take the risks needed to innovate and boost productivity and wages. We don’t live in a zero-sum world with the capitalists pitted against the proletariat.

Further, the encyclical echoes left-wing dependency theory:

With his Encyclical Sollicitudo Rei Socialis, marking the twentieth anniversary of Populorum Progressio, John Paul II reexamined the scourge of underdevelopment. He acknowledged the failure of numerous attempts to accelerate the economic development of poor peoples and to assist them in the process of industrialization, noting the persistent and indeed widening gap between the world’s North and South. He also denounced the economic, financial and commercial mechanisms that, managed by the strongest economies, structurally favor their own interests while stifling weaker economies, and he asked that they be subjected to serious ethical, not just technical, scrutiny.

But this reflects a fundamentally flawed version of dependency theory, and for AI, it implies particular policies: no software IP protection and limits on the use of AI to boost productivity in low-income nations. The first would slow global innovation. The second would help keep poor countries poor.

It also reflects the view that income inequality is rampant:

This perspective needs to become part of a broader view of global dynamics. While the world’s wealth has grown in absolute terms, it is increasingly concentrated in fewer hands, widening inequalities both within and between countries. “There are a few who have too much, and too many who have little, that is the logic of today.”

The reality is that the global Gini coefficient has declined, not risen, over the last few decades.

Additionally, the encyclical mirrors the dominant social capitalist view that higher living standards are not the most important solution to many problems, including health care, poverty, and national budget deficits. Rather, redistribution is.

The Pope writes:

Benedict XVI reiterated that economic activity cannot claim to solve social problems simply through the expansion of a commercial mentality, but must be ordered toward the common good, for which the political community bears its own irreplaceable responsibility.

To be sure, economic growth is not enough. But without it, efforts toward the common good will be much harder to achieve. That makes the encyclical’s lack of focus on technology and profit-driven economic growth even more troubling, given its assertion that “it is not enough to extol individual freedom or private enterprise if we then allow a multitude of people to continue living without decent work, protections or access to basic necessities.”

Poverty, especially in low-income countries, is not the result of the rich getting too much. It’s because too little is being produced.

Perhaps the most obvious way in which the encyclical moves from a needed call for a more human world to specific, doctrine-inspired policies is its treatment of intellectual property. The document states:

Today, among the goods that are universally intended for everyone, we must also include new forms of property, such as patents, algorithms, digital platforms, technological infrastructure and data. In a context where the wealth of nations depends increasingly on knowledge and technology, when these goods remain concentrated in the hands of a few, without adequate forms of sharing and access, a new imbalance is created that contradicts the universal destination of goods. In turn, it widens the gap between the included and the excluded, between those who can participate in the digital revolution and those who remain on the margins.

Certainly, there should be robust debates around intellectual property and how to strike the right balance between the incentives to innovate that IP provides and the immediate use of technologies that weak IP enables.

But the encyclical doesn’t do that. It simply reproduces the social capitalist view that IP should be eliminated so that the masses can get cheap or free drugs, software, and content now. However, without the ability IP provides to monetize investment, there would be fewer new drugs, software, and content in the future.

We see the same social capitalist view with respect to data:

Like the natural environment, the “digital ecosystem” can be preserved or exploited, shared or monopolized. Solidarity demands that decisions regarding data, algorithms, platforms and artificial intelligence take into account not only the immediate benefit for a few, but also the impact on all peoples and on future generations.

Making all data open would mean a less robust digital ecosystem and the end of free digital services, especially in developing nations. Users in poorer countries are being subsidized by users in richer countries when it comes to free Internet access, because lower average incomes mean those markets generate less advertising revenue. In effect, removing the ability to monetize data would limit revenue for Internet platforms and similar companies.

In addition, Pope Leo XIV does not seem to notice the intellectual contradictions in the document. On the one hand, it wants digital platforms to combat hate and misinformation, but on the other, it wants to reduce their “enormous power.” Which is it?

And of course, who defines misinformation? The state, to support its own interests? Certain politically inclined groups with clear biases, like the Southern Poverty Law Center?

Another contradiction is that the encyclical claims companies seek profits above all else, yet it also asserts that these very same companies seek to exclude certain groups. It says, “Justice demands that we prevent the emergence of new forms of exclusion and deprivation of freedoms: individuals and peoples hindered or denied access to basic technologies.” But if companies are only interested in profits, why would they deny sales to anyone?

Furthermore, the encyclical, like social capitalist views generally, damns AI for a host of problems that are not unique to it and that are, for the most part, already regulated, including “invasive surveillance and social groups penalized by opaque algorithms that perpetuate prejudice and discrimination.”

Companies selling AI services have massive incentives not to discriminate. Why sell an insurance algorithm that misprices risk? And in many AI use cases, including hiring, lending, credit scoring, and insurance, laws already exist that prohibit discrimination. AI doesn’t change that.

Like virtually all who embrace social capitalism, this encyclical gets technology and employment wrong, succumbing not only to the lump-of-labor fallacy but also to the preference for short-term protection against long-term progress.

The document asserts:

the convergence of automation, robotics and AI is rapidly transforming the very structure of work. It is said that this will bring great improvements for everyone. In reality, however, the “new ways” of working are not necessarily better, for “while AI promises to boost productivity by taking over mundane tasks, it frequently forces workers to adapt to the speed and demands of machines, rather than machines being designed to support those who work. As a result, contrary to the advertised benefits of AI, current approaches to technology can paradoxically de-skill workers, subject them to automated surveillance and relegate them to rigid and repetitive tasks. The need to keep up with the pace of technology can erode workers’ sense of agency and stifle the innovative abilities they are expected to bring to their work.” Precisely in order to avoid this drift, it is necessary to design systems that are centered on the human person and not solely on performance.

It goes on to claim that because of the so-called “fourth industrial revolution”:

this concern is even more acute, as innovation is often pursued solely for reducing costs and increasing profits... Yet, the protection of employment opportunities and the irreplaceable role of the individual must remain the general rule. The pursuit of greater profits cannot justify choices that systematically sacrifice jobs, because the human person is an end, not a means, and the economic order must remain subordinate to human dignity and the common good.

So, does that mean it was not humane to develop the tractor to boost agricultural automation? Or the electromechanical telephone switch to replace operators? Or self-service gas stations to replace gas jockeys? Productivity means reducing costs. That means reducing prices. And that means helping consumers.

To be sure, if for some reason AI were to create a lumpenproletariat, that would be cause for concern and action. But as I have written until my fingers bleed, there is no logic behind that claim. Global per capita incomes could go up by 500 percent, and people would not run out of things to buy.

On top of that, let’s say we cut the workweek to 15 hours. We are now talking about a 1,500 percent increase in global productivity, a far cry above the long-term average of 3 percent a year.

And of course, the encyclical embraces a social capitalist view that government should step in to ensure that no one ever loses their job because of AI. The Pope writes:

At this time of transition, it is not enough to react only when jobs disappear; we must oversee the transformation in advance. One viable path is, first of all, to establish social criteria for innovation. Here, every introduction of automation and AI should be accompanied by verifiable measures to protect the employment, retraining and participation of workers. In this way, technology will be oriented toward freeing up human time and capabilities, rather than producing exclusion.

If AI must protect employment, then by definition, productivity growth will be significantly limited. We didn’t get elevator productivity by making it easier for elevator operators to open and close doors. We got it by innovating self-service elevators. The reality is that if automation can’t free up human time, achieving higher living standards will be almost impossible.

The encyclical rightly points to the need for “proactive policies that make continuous training and professional transitions accessible to all, ensuring that the cost of adaptation does not fall solely on individuals.” It further states that “the benefits of innovation must be paired with investments in skills, infrastructure and essential services to ensure that technology does not widen the gap between those who have and those who have not.”

Yes, policymakers should focus on better worker training and transition assistance, as well as on investing more in skills and infrastructure. The document also advocates for:

measures to ensure equity: taxation, social protection and industrial policies must correct the imbalances created by the concentration of wealth and power. Indeed, these criteria do not constitute a curb on innovation; instead they make it civilized and humane.

Again, yes, that is generally true. Much can and should be done to ensure a fairer and more just world. And rather than posture and pontificate against AI, AI opponents should push for a world-class worker adjustment and dislocation system, as ITIF has laid out. But that is very different from tying down AI “Gulliver-like,” as the encyclical calls for.

The problem is that this logic quickly moves from helping workers adjust to slowing AI itself. The encyclical urges “rigorous evaluation and even, at times, a slower pace in adopting AI,” saying that this “does not mean opposing progress; instead, it is an exercise of responsible care for the human family.”

It goes on to assert: “What is needed is a more active political involvement that is capable of slowing things down when everything is accelerating, and of protecting the opportunities for communities still to be able to participate and ask questions.”

While it might not mean opposing progress, that will be the effect.

One rationale offered for this slower approach is environmental. Here again, the encyclical reflects the social capitalist view of the environment, claiming degradation is caused by capitalism and consumerism:

Broadening our perspective to the use of AI in society, we see that it is now embedded in decision-making processes across many sectors and at multiple levels: in communication, management and control. The gains in efficiency and the potential to improve certain services are clear, yet rapidly and uncritically adopting them exposes us to a range of risks, including the tendency to overlook the environmental impact.

Current AI systems require enormous amounts of energy and water, significantly influencing carbon dioxide emissions, and place heavy demands on natural resources. As their complexity increases, especially in the case of large language models, the need for computing power and storage capacity grows too, which requires an extensive network of machines, cables, data centers and energy-intensive infrastructure. For this reason, it is essential to develop more sustainable technological solutions that reduce environmental impact and help protect our common home.

But why single out AI companies? Electricity demand is rising rapidly worldwide (without AI) as companies and consumers switch from fossil fuels to electricity. Why are they not called out for being environmental scofflaws? Also, the encyclical fails to note that it is AI and data center companies leading clean energy innovation and deployment, especially as fiscally constrained governments have cut their support.

Continuing to echo the dominant social capitalism doctrine, the encyclical treats algorithmic responsibility as another rationale for intervention:

Indeed, entrusting an algorithm in practice with the power to select who is worthy or not, without anyone bearing responsibility for that judgment, is to hand over the task of redefining the boundaries of human possibilities.

To be clear, any organization that uses AI is ultimately legally responsible for harms or errors. It is the organization that will be sued. And if it wants to, in turn, sue the company that provided it with AI tools, it is welcome to do so.

The document also channels the same disdain for large companies and concentrated industries as the social capitalist view does:

The principles of Social Doctrine offer a framework for understanding this new reality. In a world where data, computational resources and regulatory influence remain in the hands of a few, to speak of the common good means exposing this new form of epistemic, economic and political asymmetry and naming the new monopolies of AI.

The reality for over a century is that most highly capital-intensive and innovative industries are characterized by competitive oligopolies, not Adam Smithian competition. Any attempt to change that will lead to lower living standards and reduced competitiveness.

Try telling any AI company CEO that their company enjoys a cozy monopoly, and they will look at you like you are crazy. The truth is that they all face the risk of Schumpeterian creative destruction, and that is what keeps them relentlessly focused on innovation to serve customer needs.

Taken together, these concerns lead the Pope beyond a “proceed with caution” warning. The encyclical doesn’t just call for slowing down AI development; it calls “to disarm” it:

Disarming AI means freeing it from the mentality of “armed” competition, which today is not limited simply to the military context, but is also an economic and cognitive phenomenon. This entails a race for ever more powerful algorithms and larger datasets, driven by the desire to secure geopolitical or commercial dominance. To disarm means discrediting the assumption that technical power automatically confers the right to govern. To disarm does not mean rejecting technology, but preventing it from dominating humanity.

It means freeing technology from monopolistic control and opening it to discussion and debate, therefore making it human-friendly and restoring it to the plurality of human cultures and ways of life. Our task today is not only ethical or technical. It is ecological in the deepest sense, for it concerns a new dimension of our common home. AI is already an environment in which we are immersed, as well as a force with which we must engage. For this reason, merely regulating it is insufficient; it must be disarmed, welcoming and accessible.

This is akin to saying that in the face of the threat of a globally aggressive Soviet Union, the West should have disarmed. Global disarmament might have been good, but it was not possible. The Soviets never would have agreed. Today is no different.

The free world is caught in a critical AI competition with China, and if the CCP wins, it would have enormous negative implications for Western freedom. To the extent there are issues around LLM safety, the two superpowers can and should cooperate, something President Xi and President Trump touched on during their May 2026 summit. But the last thing the CCP will do is “disarm” and slow its AI development.

The encyclical is on much firmer ground when it turns to certain currents of thought that “interpret progress as surpassing the human condition.” Perhaps the best part of the document is the Pope’s worry about transhumanism and posthumanism. He writes:

These perspectives form the ideological background present in some centers of technological power and occupy the collective imagination in a simplified form, especially in the media and on social networks. They tend to foster enthusiasm for new technologies through a futuristic vision of an “enhanced human being” or “human-machine hybrid.”

Pope Leo XIV is right. The Silicon Valley tech bros, with all their hype about the “Singularity” and ASI (artificial superintelligence), reject fundamental aspects of being human. And he is correct to call them out. They do more harm than good by scaring the bejesus out of many people. But even in Silicon Valley, these voices are a minority and should be usefully ignored—just don’t watch their TED Talks or follow them on X.

Yet even here, the encyclical goes too far by blurring the line between rejecting transhumanism and supporting innovation that reduces suffering. It states: “Our relationship with life seems to be in crisis today. Everything that appears as a “limit” — incapacity, illness, old age, suffering, vulnerability — tends to be seen primarily as a defect to be corrected, rather than as a reality.”

Does the Pope really believe that illness is an inherent part of being a child of God? Clearly, this can’t be the case, given the suffering that diseases like cancer and Alzheimer’s impose on people. Supporting medical innovation to cure illness is very different from supporting radical life extension.

It’s still early on the S-curve of AI innovation, and hopefully, the social capitalist techno-Lilliputians will not be able to tie down the AI Gulliver. But documents like the encyclical make that more likely.