Inequality creates poverty

Two centuries ago, kings would not have refrigerators nor cars or hot tap water. But they were not seen as poor. This shows how poverty can be a relative matter. In this world of perceptions, inequality can be the cause of poverty. This Business Week review of a book by Benjamin M. Friedman, The Moral Consequences of Economic Growth, highlights this issue:

As Friedman notes, there is plenty of evidence that people judge their
well-being by comparing themselves to others. As the average income in a country goes up, so do expectations. As a result, the level of GDP per person in a
country, taken alone, doesn't necessarily say much about the level of happiness.

This should be kept in mind when talking about raising income per capita. Some say that as long as the poor gets richer, we shouldn't worry that the rich get even richer. Actually, we should: we're creating poverty.

(from the World Bank's PSD Blog)