It is the Pope's first encyclical on social issues
The Pope has called for reform of the United Nations and financial bodies, giving them the "real teeth" needed to tackle economic and social injustice.
Benedict XVI said the blind pursuit of profit and economic mismanagement had "wreaked havoc" on the global economy.
The market, said the Pope, must not become the place where the strong prevail over the weak.
His encyclical letter said a reformed UN should strive for disarmament, food security and environmental protection.
An encyclical letter is the highest form of papal teaching, says the BBC's David Willey in Rome.
This letter, Caritas in Veritate, or Charity in Truth, is his third since being made Pope in 2005. It is the first to focus on social issues, and follows two on spiritual matters.
The densely argued 144-page document is the result of a two-year effort by the Pope to bring Catholic social teaching up to date on the ethical responsibilities for the global economic meltdown, says our correspondent.
Its publication comes on the eve of Wednesday's G8 meeting of world leaders at L'Aquila.
"There is a strongly felt need... for a reform of the United Nations Organisation, and likewise of economic institutions and international finance, so that the concept of the family of nations can acquire real teeth... there is urgent need of a true world political authority," the Pope wrote.
The strengthened international body should work "to bring about integral and timely disarmament, food security and peace, to guarantee the protection of the environment and to regulate migration," Benedict said.
Dangers of profit
The letter, addressed to all Catholics "and people of goodwill", reminds them of their moral duties in financial dealings.
"Profit is useful if it serves as a means toward an end," he wrote.
"Once profit becomes the exclusive goal, if it is produced by improper means and without the common good as its ultimate end, it risks destroying wealth and creating poverty."
He warned that globalisation, properly managed, could "open up the unprecedented possibility of large-scale redistribution of wealth on a world-wide scale".
But badly directed, it could "lead to an increase in poverty and inequality, and could even trigger a global crisis".
On Friday Pope Benedict will have his first meeting with President Barack Obama at the Vatican, when the new US leader will have the opportunity to exchange views with the Pope on the moral imperatives facing world leaders in 2009, our correspondent says.