Divorce as a Re-Distributive Mechanism
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There are, however, grounds for distinguishing marital
property questions from ordinary property questions, because persons who
cohabit on a domestic basis share a common standard of living and usually
also the benefits of each other's property. A major element in many marriages
is the raising of children, and the traditional female role, requiring
her full-time presence in the home, places the married woman at a disadvantage
so far as earning money and acquiring property are concerned. It is
inconsistent of society to encourage a woman to take the domestic role of wife and mother, with its lower money and property potential, but in property matters to treat her as if she were a single person. It is also inconsistent to place upon the husband the sole responsibility for maintaining his wife and children, if his wife has regular employment outside the home. When the marriage is dissolved, if the wife has not been regularly employed and now enters the labour market on a full-time basis, she may be at a considerable disadvantage as far as salary and pension rights are concerned.”
(Encyclopaedia Britannica, 1997 Edition).
When a man and a woman dissolve a marriage, matters of common matrimonial property are settled by dividing the property accumulated by one or both of them during the marriage – between them. How the property is divided depends on the law prevailing in the territory and upon the (non) existence of a prenuptial contract.
The question is exceedingly intricate from the legal point of view and requires a kind and breadth of expertise that far exceeds anything this author has to offer. It is the economic angle that is intriguing. Divorce in modern days constitutes one of the biggest transfers of wealth in the annals of Mankind. Amounts of cash and assets which dwarf anything OPEC enjoyed in its heyday – pass between spouses yearly. Most of the beneficiaries are women. Because the earning power of men is almost double that of women (depending on the country) – most of the wealth accumulated by any couple is directly attributable to the husband’s income. A divorce, therefore, constitutes a transfer of part of the husband’s wealth to his wife. Because the disparities that accumulate over years of income differentials are great – the wealth transferred is enormous.
A husband that makes an average of 40,000 USD annually throughout his working years – is likely to save 7,000 USD annually (or close to 300,000 USD in 20 years in the career path – with accumulated returns and assuming no appreciation in the prices of assets). His wife stands to receive 150,000 USD of these savings if the marriage is dissolved after 20 years. Had she started to work together with her husband and continued to do so for 20 years as well – on average, she will have earned 60% of his income. Assuming an identical savings rate for her, she would have saved only 120,000 USD and her husband would be entitled to 60,000 USD of it. Thus, a net transfer of 90,000 USD from husband to wife is the likely outcome of the divorce of this very representative couple. An average of 45% of the couples in the Western hemisphere end up divorcing. A back-of-envelope calculation can demonstrate the monstrous magnitude of this phenomenon. Divorce is, by and large, the most powerful re-distributive mechanism in modern society. Women belong to an economically underprivileged class, are still highly dependent on systems of patronage and, therefore, are the great beneficiaries of any social, progressive, mechanisms of redistribution. Taxes, social security, other social unilateral transfers, single parent benefits – all accrue mostly to them. The same goes for the “divorce dividend” – the economic windfall profit which is the result of a reasonably standard divorce.
But economic players are assumed to be rational. Why would a man enter such a transaction with his eyes peeled ? Who would give up 90,000 USD for no apparent economic benefits ? Dividing the matrimonial property in the above mentioned illustrative case is the equivalent of a monthly cash transfer of 300 constant USD from the husband to the wife. What is this payment for ? Presumably, for services rendered in the house, in child rearing, as a companion and in the conjugal bed. This must be the residual value of these services to the man after discounting services that he provides to the woman (including rent for the use of his excess property, sexual services, protection, companionship to the extent that he can provide it, etc.). This is also the marginal value added of these services. It is safe to say that the services that the woman renders to the man exceed in value the value of the services that are provided her by him – by at least the amount of 300 constant USD per month. This excess value is accumulated in the form of property accruing to the woman upon divorce. This is also an unusual economic incentive to adopt this course of action.
But this does only little sense. Children are an economic liability – not a revenue generating asset, but one that absorbs income and converts it to property outside the ownership, control and pleasure of both members of the couple. Every dollar invested in an offspring’s education – is accumulated as an asset by the child, an asset, which is left out of the control of both husband and wife. Why should the man stimulate the woman (by providing her with a 300 constant USD a month incentive in the form of property) to bring children to the world, raise them and provide them with a disproportionate portion of her scarce resources ? The children compete with their father on these scarce resources – for which only the father pays ! Here is an economic Oedipus complex for you. When the woman maintains the house, she preserves its value for both members of the couple. When she prepares dinner for her mate or engages in lively talk or (more or less) livelier sex – these are services rendered for which the male is liable to pay, one way or the other. But when she raises children -–this both reduces the quality of services that the man can expect to receive – and puts their resources to an economically unproductive use (by transferring them to another, not a member of the partnership).
There is only one plausible explanation : an investment is made in the present in order to reap its rewards (its returns) in the future. There is an hidden expectation that the investment will be richly rewarded, that is, that it will provide reasonable returns. Indeed, in the not too distant past, children used to support their parents financially, cohabitate, or pay for their prolonged stay in convalescence centres and old age homes. Parents regarded their children as the living equivalent of an annuity. “When I grow old” – they would say – “my children will support me and I will not be left alone.” Such an economic arrangement is also commonly agreed with insurance companies, pension funds and other savings institutions : invest now, reap a monthly cheque later in life. This is the essence of social security. Children were an elaborate insurance policy.
Today, things have changed. Higher mobility and the deterioration in familial loyalty (actually, in the very concept of a Family) rendered this equation dubious. No parent can rely on future financial support from his children. That would constitute wishful thinking and an imprudent investment policy.
If this is true, we should be able to discern a rise in the number of divorces coupled with a decline in the importance of the existence of children as divorce-deterrents. Both are visible. It seems that, contrary to a widespread misconception, children play no statistically significant role in preserving marriages. People divorce despite them. And the divorce rate is skyrocketing, as is common knowledge.
Another prediction : the less economically valuable the
services rendered by the woman and the more her earning power increases
– the more the monthly transfer from man to woman is likely to be eroded
and becomes less and less significant. The more impetus will be given to
prenuptial property contracts, and to separation of acquests and other
forms of matrimonial property. Women will try to keep all their income
to themselves and not involve it in the matrimonial property. Men will
prefer this arrangement as well, because they will feel that they are not
getting services from their wives to an extent sufficient to justify a
regular monthly redistribution of their common wealth in her favour. As
the economic basis for marriage is corroded – so will marriage itself flounder
until it changes irrecognizably and assumes an essentially non-economic
form, devoid of most of the financial calculations of yore.