It's not that this is untrue, just that it's a strawman argument. I don't know anyone who thinks this. I don't read anyone who thinks this. Pretty much most folks who are economically-sophisticated understand that capitalism actually doesn't work so well in societies that don't abide by a fundamental public morality that includes: respect for property rights; respect for contracts; respect for the rule of law; respect for individual liberties. These things put all persons in a society on an equal footing, legally, and that permits the genius and hard work of individuals to cause them to flourish and prosper.
I don't know any serious folks who think that capitalism can thrive outside of a society without a strong legal and juridical system protecting property, contracts, individual rights, etc.
It's the folks who abridge capitalism, free enterprise, by using government to enforce economic rents for government cronies, by changing the laws after the fact, by INCREASING the power of the regulatory state so that no one REALLY knows what the law is until the regulators, and then the judges have their say. The one with the most expensive lawyers, the most connected lobbyists, and the biggest slush fund wins. The guy practicing actual free market capitalism, well, he may get left out in the cold.
Increasing inequality isn't a result of red-in-the-tooth capitalists run amok, but rather than those who are already rich and powerful buy politicians and REDUCE the function of the markets, and use government to further enrich them, to create regulatory barriers to entry to markets, and to plain old steal from the public purse.
The pope's words seem to be directed at folks that don't exist, and give cover to evil-doers who actually do exist.