5 ways our broken economic system is damaging our mental health

May 26, 2022

In response to #MentalHealthAwareness week, we explore five ways in which our growth-obsessed capitalist economy threatens our mental health. Working class people are struggling to cope with the spiralling cost of living and the lack of safe and affordable homes. Racial inequality and financial exclusion pile further pressure on ethnic minorities. And the climate emergency brings new challenges, putting vulnerable people at risk right now, and all of us at risk in the future.

Content warning: Please be aware the following article contains brief mentions of suicide risk. These highlight the groups that are at greater risk, and the wider circumstances that contribute to that risk, but do not discuss any specific events or details.

Cost of living crisis

The cost of living crisis is a political choice that is harming the poorest and most vulnerable people. We’re seeing this play out as oil and gas giants like BP and Shell announced record profits, but the government remained reluctant refuses to impose a windfall tax on their profits until the situation became critical and the political pressure to act was overwhelming. While pensioners rode the bus to keep warm, Ministers made painfully out-of-touch comments, suggesting that people who are struggling buy supermarket ‘value’ brands to cut down living costs, or take on more hours. The government’s slow response to rising living costs is plunging millions into poverty, and it remains to be seen whether the windfall tax and support package announced this week will be enough to stop and reverse the spiral.

Research has shown that poverty worsens mental illness, driving more than 1.3 million cases of avoidable depression in the UK alone. Depression and other mental conditions often impact people’s ability to work, leading to a drop in income. This can lead to people accruing debt, and finding it more and more difficult to stay on top of their finances: a new poll commissioned by the Money and Pensions service revealed that 57% of people across the UK are worried about finances.

Last year, the government promised to ‘level-up’ after the pandemic, but after handing bankers a £1 billion a year tax cut, hiking national insurance, and recently announcing another big tax cut on corporate profits, it’s clear that so far the government’s promises of ‘levelling-up’ are falling far short of where they need to be. Instead, the political agenda continues to benefit the rich and powerful, and neglect the needs of the most vulnerable.

The Bank of England has also neglected the needs of working class and lower income people, by putting the vested interests of banks and large finance firms ahead of the rest of the economy. Since the government granted the Bank its independence in 1997, the Bank has been ‘doubling down on a growth model driven by high asset-prices and private debt’. Our senior economist, David Barmes, wrote in openDemocracy how the government and the Bank of England should work together to put the brakes on rising living costs with energy price caps, matching benefits to people’s needs, and by introducing a wealth tax. Instead, the Bank of England has raised its main interest rate to 1%, which in turn pushes up borrowing costs on loans, putting further pressure on people’s finances. The Bank usually raises interest rates to slow down price inflation, but the cost of living crisis has its roots in international supply chains and the economic impact of the war in Ukraine, and higher interest rates won’t stop prices going up.

Housing crisis

Mental breakdown and housing are inextricably linked. According to Shelter, 1 in 5 adults suffered mental health issues due to housing in the last five years. Access to a safe and warm home is a human right, but people’s housing needs are simply not being met, due decades of failed government policy that has accelerated the phase out of social housing provision through deregulating the mortgage market and starting Right to Buy in the 1980s.

The impact of these policies is still being felt today, but now Boris Johnson is considering renewing the ‘Right to Buy’ policy for housing association tenants, showing the government has no intention of tackling the underlying causes of the housing affordability scandal. Right to Buy has led to a mass transfer of council houses into private ownership, and with local authorities unable to re-allocate the funds to build new homes, the stock of social housing has been left with significant gaps.

Back in March, Positive Money released our new report on housing: Banking on Property: what’s driving the affordability crisis and how to solve it. The report exposed how for decades, banks and governments have turned houses into financial assets instead of homes.

For years, the level of home ownership has been a key indicator of social mobility in the UK. However, with the prospect of home ownership becoming increasingly out of reach for young people, they’re left stuck in the private rental sector, often in poor living conditions that increase the likelihood of developing mental illness. This is compounded with extortionate rents, costing renters over 30% of their salary (this figure rises to 42% in London), rendering it near impossible to save enough for a mortgage deposit.

We also need to ensure our social housing stock is fit for purpose, and hold landlords to account when properties fall short of being a decent home. Kwajo Tweneba, a social housing activist, has recently gone viral on social media after exposing the extremely poor conditions of many working-class people in social housing. In his videos, Kwajo reveals the links between poor housing conditions and the impacts it has on people’s mental health. Work like Kwajo’s is crucial, especially as the current housing market has been weakly regulated for some time, and renters’ rights have been decimated, leaving them vulnerable and more likely to suffer from physical and mental health problems.

Financial exclusion and access to cash

It was announced in the Queen’s Speech last week that access to cash is being protected under the Financial Services and Markets bill. This is a promising change of direction, considering how banks have exploited the coronavirus pandemic to ramp up bank branch and cash machine closures. Amidst the cost of living crisis, more and more people are turning to cash to keep track of spending, and research shows that people with mental health conditions often rely on cash as a tool to control their spending. Cash also provides a fundamental lifeline for many vulnerable people, including victims of abuse and the elderly, but the steady trend towards a cashless society raises serious concerns about whether digital money can meet those needs.

Financial exclusion — people being denied access to financial services — also has a significant impact on people’s lives, and disproportionately impacts ethnic minorities, causing them to face distinct challenges with accessing essential services they need. For example, Black-owned businesses are four times less likely to be approved for loans, and Black communities remain unbanked or underbanked. This institutional racism built into our financial system increases the likelihood of experiencing mental health difficulties for these groups.

These financial injustices are also embedded within the ‘hostile environment’ created for refugees, which effectively shuts off the economy for asylum seekers and refugees living in the UK by denying them the right to work and forcing them to use controlled cards for payments. In March, we spoke to the CEO and Founder of mental health charity, Inini, Last Mafuba who described the challenges of her service users surviving on £35 a week and how this negatively impacts their mental wellbeing. This, compounded with the loss of access to cash, makes it extremely difficult for these groups to participate in everyday life.

Racial inequality

In April, the Bank of England launched an exhibition highlighting its role in the trans-atlantic slave trade. New research reveals the Bank owned two plantations in Grenada and 599 slaves in the 1770s. Following Black Lives Matter protests in 2020, the Bank has attempted to make amends for its role in the slave trade by issuing a public apology and removing paintings of Governors known to be slave traders.

However, these changes are surface level and do little to alleviate the structural inequalities ethnic minorities continue to face. In our ‘Exploring race, banking and colonialism’ series, we explored how British financial institutions were major beneficiaries of the exploitation of Black and Brown people via slavery and colonialism and how this manifests in modern banking today. When you take into consideration that ethnic minority groups are more likely to live in the most deprived 10% of areas in England, and how deprivation leads to higher rates of suicide and depression, we can see how structural inequalities perpetuate a dangerous cycle that causes minority groups to be at much higher risk of mental health problems.

This, compounded with interpersonal racism, has been linked to instances of racial trauma and PTSD. According to the Mental Health Foundation, older South Asian women are an at-risk group for suicide. The government’s 2017 Race Disparity Audit found that Black women are most likely to have experienced a common mental disorder, such as anxiety or depression, and that Black men are the group most likely to have experienced a psychotic disorder.

The links between race, deprivation and mental illness are disconcerting, and reveal the extent to which mental health problems are exacerbated by systemic inequalities that operate within the powerful institutions that influence our day to day lives.

Climate crisis

Research showing the links between mental health and climate change is limited, but the Grantham Institute published a paper last year highlighting how it is increasingly becoming one of the main drivers of psychological distress. People directly affected by ecological breakdown face social, economic and mental challenges such as trauma, economic instability, environmental degradation, migration and increased suicide rates, while those indirectly impacted by climate change experience emotional turmoil referred to as ‘eco-anxiety’, which is especially common amongst young people.

However, the impacts of the climate crisis will fall most heavily on those already struggling against economic systems of oppression. Dr Keston Perry previously wrote about the links between finance, colonialism and climate change on our blog, highlighting how the subjugation and exploitation of Black people through slavery produced a significant proportion of the material wealth amassed by some of the richest countries in the global North. Today, fossil fuel consumption is far higher in the US and the UK, but its impact disproportionately affects people living in the global South. Consequently, the upheaval caused by extreme weather events often forces people to migrate, leading them to develop depression, anxiety and post-traumatic stress disorder (PTSD) in the long-term.

Britain’s colonial legacy was recently acknowledged by Green New Deal Rising activists,  who interrupted a speech by Home Secretary, Priti Patel at a Conservative Association dinner earlier this month. The group condemned her controversial plan to send refugees to Rwanda. One of the protestors, Holly Hudson, wrote in the Guardian about her motivation for speaking out, highlighting how colonial exploitation and the climate crisis have destabilised the global South and forced people to make dangerous journeys to safer places, including the UK, which has a moral and legal obligation to respond.

Last month, climate scientists warned that it’s ‘now or never’ to mitigate the worst effects of the climate crisis. Following COP26 in Glasgow last year, the UK government pledged to reach net zero targets by 2050, but the government’s promises ring hollow when they’re permitting new licences for oil and gas drilling in the North Sea. Furthermore, UK banks are amongst the worst funders of climate destruction: the latest report by Banking on Climate chaos ranked Barclays 7th globally in fossil fuel expansion. Considering that the government’s Net Zero Strategy relies on private investment, we urgently need stronger incentives for banks to kickstart the green transition, and new rules to stop banks making huge profits from environmental destruction.