US Edition Speaking just before he met David Cameron and Nick Clegg at St Paul's Cathedral, he said it was vital to find the reasons for the “frustration and anger” behind the outburst of violence in English cities.
He accused governments and the media alike of “brainwashing” children with “money, money, money” ideas.
But he warned people struggling amid economic hardship to put their faith in “optimism and hard work” rather than blaming others.
The exiled Tibetan Buddhist spiritual leader was in London to receive this year’s Templeton Prize, which promotes religious understanding, in a ceremony at St Paul’s Cathedral.
He donated most of the £1.1 million award - the world’s biggest prize in monetary terms – to Save The Children, for work preventing malnutrition among children in India, where he has lived in exile for 50 years.
The award was conferred during a spectacular interfaith service which mixed Buddhist chanting with gospel singing and traditional choral music under Sir Christopher Wren’s dome.
Among those in the congregation were the Archbishop of Canterbury, Rowan Williams, the Chief Rabbi Lord Sacks, and the actress Joana Lumley, whose support for Nepalese Gurkhas has brought her into contact with the Tibetan community.
During the service the Dalai Lama paid tribute to St Paul’s as a “great temple”.
But, speaking beforehand, he also expressed sympathy for the anticapitalist protesters who camped out below its steps for several months and said he might have been tempted to join them.
“Money and power fail to bring inner peace,” he said.
“One poor person, in the material field [may be] poor but mentally a very, very happy person – you can see that.”
He added: “All the time, in the newspapers we hear ‘money, money, money’.
“The Government always says ‘money, money, money’, so from childhood [we] are in some way brainwashed [to think] we should see money as the ultimate source of happiness – that, I think, is wrong.
“Whether we believe in religion or not, we must pay more attention to our inner beings in order to be happy.”
He described the global economic crisis as a “man-made problem” adding: “Logically any problem which is created [by man] we must have the ability to solve.”
But he said the solution lay in “hard work” and emphasised the importance of people not losing their self confidence.
There was laughter as he leaned across apologetically to the Canon pastor of St Paul’s, the Rt Revd Michael Colclough, to add: “You must keep your optimism and work hard and not rely on praying.”
He continued: “Recently you had some problems in London and also some other cities.
“I always had the view that Englishmen were mature people, sensible people, law-abiding people.
“If such things happen in developing countries it is quite understandable but in England that happened, I really felt ‘Oh’.
“I immediately sent a letter to the Prime Minister, I expressed my sadness and condolences to the Prime Minister and I [then] I expressed: ‘When the time comes make a more serious investigation or research [into] what caused this.
“I felt that young people …their life is just beginning, life is not easy …[there are] no opportunities.
“Individual optimism and determination is the key factor, if you take it for granted that your life will be easy something will happen, frustration and anger [will follow].”
The exiled Tibetan leader took time to visit David Cameron and Nick Clegg at Downing Street during his one-day visit to the UK. He is due to return later this summer for a visit to London, Manchester and Edinburgh.
During a press conference, he refused to discuss the recent wave of Buddhist monks setting themselves on fire in Tibet in protest at Chinese rule saying that he had handed over his political role.
But he described China as a country suffering from an “immense moral crisis”.
When asked the secret of his own serenity, instead of delving into Buddhist philosophy he revealed that his doctors had ordered him to lose weight.
“What suffered was my lunch and breakfast have suffered,” he said.
“Usually I have a very heavy lunch and breakfast … of course, as a monk, no dinner.”
There was a minor disruption toward the end of the ceremony when a woman at the back of the cathedral began shouting complaints about the cathedral as the Rt Revd Colclough was speaking.