Lord Grantham may think he can take arms against the slings and arrows of 1920s Britain that threaten Downton Abbey and its outrageous fortune, but he faces a mighty adversary: the immutable laws of economics.
When Mrs. Patmore tussles with the new mixer, or Grantham frets over “death taxes,” or “poor Molesley” loses his post and resorts to patching up the pavement, Downton Abbey is paying homage to economic forces that transcend early 20th-century Britain and apply just as neatly to the 21st-century world.
Downton’s soap opera characters are wrestling not only with their emotions, but also with basic Downtonomics: the threat and promise of technological change, burden of inheritance taxes, foreign investment, danger of speculation, need for retirement planning, virtue of investing for growth, and inadequacies of the social safety net. Is the cook, Mrs. Patmore, any less adept with that mixer than your grandmother is with a tablet?
A primer in Downtonomics:
1. New technology demands adaptation — and not everyone can manage it
Take the lowly mixer. It arrives in a modest brown box labeled “mixer-beater,” with its shiny metal body and a pair of mixing heads. Ivy and Daisy are fascinated.
Patmore “sees this as the kiss of death, the nail in the coffin,” as Lesley Nicol, the actress who plays her, says in the online special feature. The electric mixer will make it easier and faster to prepare food. And while bottom-rung scullery maids Ivy and Daisy adapt easily to the new gadget, as young people often do, Patmore can’t quite master it; she breaks a bowl while trying to use it, declaring that she “must have put those rotty prongs in wrong.”
The mixer is only the beginning. Patmore is slow to adapt to a new sewing machine and refrigerator, which she is told will help reduce costly waste. Lady Grantham asks the reluctant Patmore, “isn’t there any aspect of the present day you can accept without resistance?” And Patmore says of Lady Grantham, “nothing can stop her from dragging us into the new age.”
Patmore wasn’t the only one in post-World War I Britain struggling with new machinery. The Great War had helped propel technological change as the country imported machine tools from the United States to help meet war needs. University of California at Berkeley professor Barry Eichengreen (whose wife is a fan of the show) wrote that Britain at the time “took a first tentative step down the road that led to modern mass production à la the United States.”
Will Patmore find her way down that road?
2. Workers who don’t adapt slide down the economic ladder
Molesley was trained as a butler, and a butler was a skilled position in those days, requiring someone who knew how to manage the staff. When Matthew Crawley died, however, Molesley lost his position as a valet and couldn’t find another until the house’s senior butler, Mr. Carson, offered him a job as footman, a position demanding fewer skills and offering less money.
“I have come down in the world, Mr. Carson,” Molesley says. “I am a beggar and so, as the proverb tells us, I cannot be a chooser.”
“I see Molesley as the 1920s counterpart of the contemporary highly skilled worker in manufacturing — left behind by changed circumstances,” says Eric S. Maskin, a Nobel Prize-winning economist who teaches at Harvard University. Today’s Molesley might be a former printing press machinist now restocking shelves at Wal-Mart.
3. Estate, or inheritance, taxes can be useful
Patmore’s battle pales in importance next to the overarching theme of the show: the crushing tax burden that threatens Downton and forces Lord Grantham to consider extreme measures to save it. Most Americans call them estate or inheritance taxes, but like today’s critics of the tax, Grantham calls them “death taxes.”
His wife, Cora, an adaptable American, is philosophical. “The world has changed. A lot of people live in smaller houses than they used to,” she says. But her husband tells his accountant, “I’ve sacrificed too much to Downton to give in now. I refuse to be the failure, the earl who dropped the torch and let the flame go out.”
Britain imposed inheritance taxes in 1894 at a modest 8 percent top rate, but during World War I, Britain’s public debt ballooned to 150 percent of GDP. So the Finance Act of 1919 raised the top rate to 40 percent on estates whose value exceeded 2 million pounds, according to the Tax Foundation.
“The inheritance tax issue creates a nice tension,” Maskin writes in an e-mail. “We fans naturally root for the family to hold on to the estate. But Lord Grantham’s economic judgment is terrible, and so getting the place out of his control (through taxes or otherwise) might be the best outcome — not only for progressives but for proponents of efficiency.”
“The taxes do make sense economically — but still we take the family’s side,” says Maskin. “That’s one reason the show’s so compelling.”
4. The wealthy should do some estate planning.
Grantham’s son-in-law Matthew Crawley — in an emotional but costly gesture — wrote a note (not a formal will) leaving his half-share of Downton to his wife, Mary. Today, that would be good planning, because a spouse does not have to pay inheritance taxes until his or her death. That wasn’t the case in Britain back then; all Mary received was a 100-pound exemption . And it meant that Matthew’s half of the estate would be taxed twice, once on Matthew’s death and once on Mary’s, before passing to their son, George.
“Seems odd really,” says Tom Branson, the Irish former chauffeur who married into the family, “that you have to pay just as much tax as if he’d left it to Mrs. Tiggywinkle down the road. That’s how it works.”
“So what are we to do?”Mary asks.
Tom says, “Your father believes we should sell land and pay it off in one lump.”
According to the London Telegraph, the family living in the real-life estate of Highclere, where Downton is filmed, was forced to sell its extraordinary art collection — including works by da Vinci and Gainsborough — at Christie’s in 1926 to save the property.
Luckily, Tom has another plan (see below).
5. Beware of speculative bubbles fueled by cheap foreign capital
Grantham might not be in such a fix if he hadn’t been such an atrocious business manager and investor.
Faced with cash-flow problems for years, he married his rich American wife, Cora (a sort of corporate merger that only later grew more sentimental), to gain access to foreign investment, namely her family money. Nothing wrong with that: China in its early economic-reform days tapped U.S. and other foreign investment, and now many U.S. companies are looking for investments by successful Chinese firms.
Alas, Grantham violates the basic rules of financial management and fails to put his wife Cora’s injection of capital to good use. Instead of investing in his family business (the estate and its many tenant farmers) or diversifying his investments, Lord Grantham gets swept up in a speculative bubble, sinking virtually all of his wife’s money into a Canadian railway scheme that goes bust. Had he been alive today, he’d have been buying subprime mortgages or giving all his money to Bernie Madoff.
More trouble is on the horizon. Cora’s brother Harold has written a letter about losing a lot of money in oil leases that Grantham says has something to do with a Sen. Fall. That is undoubtedly Sen. Albert Fall, who as President Warren G. Harding’s interior secretary took kickbacks for leases in what became the Teapot Dome scandal.
6. Invest in your company; don’t suck it dry
Downton in the early 1920s was a business that had been starved of investment for generations. It had introduced no mechanization, no new crops or livestock, and no new lines of business.
Luckily for Grantham, Matthew comes into another inheritance and Tom Branson persuades him to invest it in the estate, which has done little besides collect rents from its tenant farmers. The modernization details are sketchy, but it seems to have something to do with sheep and pigs. First Tom gets Matthew on board, and later Mary. And they fortunately ignore Grantham’s urgings to invest with an American named Charles Ponzi. Yes, that Ponzi.
7. Treat workers well and they will repay your loyalty
With Matthew gone, Tom and Mary want to reduce the number of tenant farmers and increase productivity. When one of the farmers dies, they decide to take over the lease. “The world moves on, and we must move with it,” says Mary, sounding heartless.
At the funeral, the man’s son begs to be given a chance, reminding the landowners that his family has farmed there since the Napoleonic wars. Mary says he has no legal rights. But he finds a sympathetic ear with Lord Grantham, who lends him the money to repay the delinquent rent his father ran up. Unlike most contemporary executives, who seem to feel little compunction about slashing the number of workers, Grantham feels a social and moral obligation toward the people working on his estate.
That’s a lucky thing for the tenant farmer’s son. Post-World War I Britain was suffering from high unemployment — 12 percent in 1921. The British pound at the time was the world’s reserve currency, much as the dollar is today. That helped sustain the high standard of living among those with money. But it also hurt British industrial competitiveness at a time when France and others were letting the value of their currencies sink. That is one reason the farmer’s son and the people in the Downton kitchen and servants’ quarters are so desperate to hang onto their jobs.
Trade union membership doubled to 8 million between 1913 and 1920. But there is little sign of their strength in Downton. In an earlier season, Daisy goes on strike in a battle of wills that turns farcical.
8. Can an old lumbering enterprise re-create itself for a new economy?
How it will all end is hard to say.
The British prime minister of the day, David Lloyd George, had long favored taxing the great estates, but he was also worried about the impact their collapse might have on the economy. Britain was a food importer, and shortages had pushed prices sharply higher after the war. By 1922, prices had dropped somewhat, but 20 percent of arable land went out of production over the course of the decade, according to a history of the British diet titled “From Plain Fare to Fusion Food.”
“The government is aware that up and down the country, estates are being sold in large numbers,” a dour government official, Charles Blake, tells Mary, adding that the government wanted to know how it “will it affect food production and so on.”
“You don’t care about the owners, just about food supply,” Mary says, adding that that seems “mean-spirited.”
“Mr. Lloyd George is more concerned with feeding the population than rescuing the aristocracy,” Mr. Blake replies. “That doesn’t seem mean-spirited to me.”
You didn’t need to be a government economist to doubt the viability of Downton Inc.
In an earlier season, Daisy goes to visit Mr. Mason, the father of the young man named William she married as he lay dying of war wounds. Mr. Mason had treated Daisy like a daughter since William’s death, and in vain he urged her to quit her job and help him run his tenancy, promising that he’d leave his property and savings to her.
“Do you think these great houses like Downton Abbey are gonna go on?” he asks. “Because I don’t!”
Will Mason be right? Can Tom and Mary invest wisely? Can inheritance taxes be paid on the installment plan? Is another infusion of American money on the way? Can Patmore adapt to new technology? Must Downton become more lean and mean?
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