It does not mean that if you're low-functioning in daily life, you get to blame climate change/economic inequality/injustice/whatever. Refusal to take responsibility for one's behavior is always a sign of lack of emotional health.
have you ever heard of an eastern philosopher who didn't think western civilization was profoundly sick??
it's deeply immoral that we force kids to sit in chairs for hours a day, and then diagnose them with "the ADHDs" when they don't like it. but we could multiple examples endlessly...
Quite an informal fallacy / strawman you have there, whoever said it was?
It is! I suppose because of its dubious origin. First attribution seems to be from Mark Vonnegut in The Eden Express. Did you read the book, or where did you learn what it _actually_ refers to?
But basic logic dictates that the quote (which is apocryphal) means that we cannot deduce that we are healthy simply because we are well-adjusted to society, if that society is sick. It does not say that psychiatric illness is rooted in societal or social problems. And empirically, proponents of the quote (theosophists and Buddhists) also rarely use it to refer to actual psychiatric illness, but rather to moral compasses, values, and overall behavior.
I doubt you'll find many Buddhists parrot the "I'm only depressed because of how messed up society is" line that you often see on the web, since Buddhism explicitly preaches self-transformation.