<< The Dalai Lama reminds us of Buddhism's radical social and economic messages. Photograph: Jonathan Ernst/Reuters

He was at it again the other day, telling Chinese students that he considers himself a Marxist. This wasn't just playing to the crowd – although it was reported with surprise (at least in the US), the ideological alignment is longstanding. In 1993, he said: "The economic system of Marxism is founded on moral principles, while capitalism is concerned only with gain and profitability. Marxism is concerned with the distribution of wealth on an equal basis ... as well as the fate of those who are underprivileged and in need, and [it] cares about the victims of minority-imposed exploitation. For those reasons, the system appeals to me, and it seems fair."

Neither does his tradition match the capitalist fantasies attached to it. Perhaps because Buddhism came to the west on a wave of post-war hippy soul-searching, and was then co-opted as friendly religion of choice by new ageism and the self-help movement, its radical economic and social messages have been lost under an avalanche of laughing fat-man statues, healing crystals and copies of The Secret.

The very idea of self-help in Buddhism is an oxymoron – relief of suffering can only come from the realisation that pleasing ourselves doesn't bring happiness – instead we must try to work skilfully and compassionately with others, as part of interwoven systems of connectivity that bind us together. A "western Buddhism" that prioritises solipsistic focus on the individual is so great a misconception as to be unworthy of the name – or at the least the Buddhism part – as anyone who pays it more than passing attention knows. It's also largely a media invention – many western Buddhists are serious, deeply committed practitioners. That commitment means choosing to follow a path that leads against the stream of materialism and selfishness. Of course, we don't always manage it, but that's why it's called a path of practice.

Buddhism goes way beyond the confines of the personal – realising the truth of interdependence implies taking up the challenge of engaging with others in the wider world. This isn't missionary zeal – proselytising is hardly the Buddhist way – but it does mean social action that embodies dharmic principles, and western sanghas are increasingly prioritising community involvement. As they do so, Buddhism may start to look less like some nice bit of calm and relaxation and more like a radical, uncompromising critique of the status quo.

This critique has already begun to influence the UK mainstream. It's 45 years since EF Schumacher published his Buddhist Economics essay in Small is Beautiful, which the Times Literary Supplement listed as one of the 100 most influential books since the second world war. Though the male-centric, mechanistic world it describes now seems dated, Schumacher's outline of a world driven mad by consumption (and his Buddhist-inspired remedy of sufficiency and sustainability) has informed everything from the climate change debate to the happiness agenda – particularly through the influential New Economics Foundation (NEF) thinktank, which grew out of Schumacher's vision.

The well-being indices enthusiastically taken up by David Cameron have grown in part from NEF's links with the kingdom of Bhutan and its policy of favouring gross national happiness above gross domestic product. Is the prime minister aware of the Buddhist foundation to his plans for the nation's mood?

Of course, we're a long way from a government that looks even remotely dharmic. From a Buddhist perspective, only a revolution in our collective mind can counter the momentum that keeps us grasping for happiness in all the wrong places. And that would involve more than measuring whether someone with a job and a family in sunny Cornwall feels more upbeat than a lonely, unemployed Londoner on a rainy day. It would require systemic transformation on both an intimate and a huge scale, bringing the path of personal practice together with much broader societal shifts. Could this be what the Dalai Lama is thinking of when he describes himself as "half-Marxist, half-Buddhist"?