The blue and green dots are the First World countries, and you can see that with more government spending comes greater equality. However in the poor countries (red and orange dots) it is much more random. It could be that big government in poor countries look out for the rich instead of the poor.
But does high government spending cause equality, or does a European belief in equality cause government spending, to try to correct perceived injustice? It could be that the spending is a symptom of a society that prioritises equality, rather than the sole factor which drives it.
All of this is discussed in 538.com, where this graph came from.
What's not clear on the graph above is which dot = which country. The chart below, from Wikipedia, shows inequality since WW2 in a range of countries. (Click to view full size.)
It's interesting to track various countries and think of the causes for their shifts. For example, China's inequality increased since 1985 because of their industrial boom which created many millionaires. A number of former Soviet countries have had greater equality since the fall of the Berlin Wall and their admission to the European Union. Australia's fate leaps up and down with changes in government, while Canada remains on an even keel.
What's clear is that among the richest countries America perpetuates income inequality. This is an ideological difference and has only increased, and is a topic of widespread debate in America and internationally. It is particularly interesting now because with the financial bailouts, stimulus package, and new government programmes, Obama's America is swinging strongly towards a European-style social democracy. With the Republican party particularly weak now—and probably for the next three years—it will be interesting to watch a much-weakened America make humbler choices.
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