I use the quality and quantity of energy flows to interpret economic, social, and political changes in the US and Former Soviet Union. The economic successes of both the former Soviet Union (FSU) and the US reflect an abundant supply of high quality energy. This abundance ended in the 1970s in the US and the 1980s in the Former Soviet Union. In the US, the end of cheap oil caused labor productivity to stagnate, which stopped on-going growth in wages and family incomes. To preserve the American Dream, which holds that each generation will be better off than the one that preceded it, women entered the workforce, income was transferred from saving to consumption, the US economy changed from a net creditor to a net debtor, and debt held by families and the Federal government increased. Despite efforts to hide the income effects, the end of cheap oil also is responsible for increasing income inequality. In the FSU, the end of abundant energy supplies meant that allocating the energy surplus among the domestic economy, subsidized exports to Eastern Europe, and hard currency sales to the West became a zero sum game. This contributed to the collapse of the Council for Mutual Economic Assistance (CMEA) alliance and the FSU. If the US is able to extricate itself from personal and governmental debt, solving the social and political concerns about inequality is the next formidable challenge posed by the end of cheap oil.
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