Thursday, December 26, 2013

AN ECONOMIC TOUR OF THE ENGLISH COUNTRYSIDE, STARRING DOWNTON ABBEY – ACT II


That is the thing about nature; there is so much of it. ~ Violet Crawley, Dowager Countess of Grantham

My first part of this tour (see here) recounted the centuries-old business model of the owners of England's countryside – landed-gentry like Lord Grantham of Downton Abbey – that was challenged by changing economics of the early 20th century. These changes had been building for a considerable time. Four (4) sets of events in the 19th and 20th centuries conspired to destabilize the steady world of the British aristocracy, including Lord Grantham.

First, Parliament passed the Corn Laws in 1815 that protected English and Irish farmers with significant tariffs on less expensive, imported grains, and thus raised the domestic price of bread and other agricultural products. Riots occurred in London and other cities after the laws' passage. The Corn Laws helped agricultural interests – that were squarely based on the landed gentry, including Lord Grantham's forebears – and who had reaped large financial benefit from an increase in land prices and agricultural products due to the Napoleonic Wars (1803-1815). But the emerging merchant/industrial class in England was strongly opposed to the Corn Laws because these laws kept the price of grain and bread high that in turn required wages to rise, so workers could afford necessities like bread.

After several decades of the Corn Laws and with the Industrial Revolution in full bloom in England, the balance of political power began to shift and these laws were repealed in 1846. The new "industrial elite class" had arisen. Grain imports into England from the US and other nations rapidly increased after repeal. England imported 2% of its grain in the 1830s, 24% in the 1860s. As a consequence, the British price of grain decreased by more than 30%. Britain's domestic grain producers (including most estate-based farms) could not compete with growers in Indiana, Illinois and elsewhere. By 1885, more than one million acres of domestic corn were withdrawn from production in England. Farm income for estates like Downton Abbey (DA) dropped greatly.

Lord Grantham does not seem to define his estate as acres of land subdivided into farms that produced foodstuffs. He mostly saw it as people whom he and his ancestors have taken care of forever. One doesn't dislodge trustworthy tenants simply to stay in business by dismissing them. In this sense, he obdurately went against the grain of modern agriculture. Furthermore, new, more efficient agriculture was (and continues to be) more capital-intensive – which requires more investment – something that Lord Grantham doesn't seem to have any talent at obtaining. Even if he could, he is not one to substitute cold capital for his honorable, loyal labor.

Second, the Panic of 1873 that included a stock market crash and a financial crisis added to the economic misery of investors (the landed gentry) in England and beyond. This bank panic created a deep recession and considerable poverty throughout Europe (and also the US) that reduced demand for agricultural products and other goods and services for at least 6 years. Both workers' and producers' incomes dropped as a consequence. This economic calamity, called the Long Depression, very likely added to DA's fiscal and personal woes.

Third, just as change in international trade patterns and macroeconomics were adversely influencing British estates' income stream, new residential technologies were emerging. Specifically, the telephone, central heating and electricity, not to mention the automobile, were altering what "comfortable living" entailed the late 19th and early 20th centuries. Abbeys, castles and manors built before the late 19th century – like Downton Abbey – required expensive alterations to incorporate these new standards of modern living. Just when Lord Grantham's wallet was less full, he had to pay a lot to keep up with the Lord Joneses.

Finally, there's World War 1, the "Great War". This 4-year conflict began in 1914 and killed about 15 million soldiers and civilians, including over 700,000 British soldiers. No one was spared its devastating effects, as we have already seen in DA. Beyond the horrific deaths and injuries, WW1 transformed the social order in Britain. The influence and power of the landed gentry were reduced. Not only were lords, prospective heirs and downstairs staff of the estates harmed and killed, but large numbers of those who provided service to the manors and abbeys never returned even if they survived the war. Instead, they cast their fates to new lives working in the cities.

Thus, by the 1920s the economics of many British country estates like DA had been inexorably altered. Very few were roaring at all; many were teetering on unstable fiscal ground. They needed an influx of income and capital as their traditional business model had been forever fractured.

After conducting contents auctions to raise funds, numerous estates were demolished. Indigent lords, like the 9th Duke of Marlborough (the first cousin of Winston Churchill), cast a wider eye and married wealthy American heiresses to finance and save their life style. In the TV show, Lady Mary's foreboding, nouveau riche marriage would have had a similar remunerative purpose; praise be for small emotional favors that it wasn't consummated. Fortunately, Matthew's unexpected inheritance from a far-away, forgotten uncle served the same, much-needed compensatory objective for DA.

With this backdrop, what will happen to DA in its 4th season? Will Tom take up the "modernist" scepter that Matthew held as necessary to insure DA's financial security? Will Tom thus consolidate the farms, dismiss many cottagers and ox-herds and watch Lady Edith operate one of the new tractors? Will Lord Grantham lie down across his driveway (but only after Mr Carlson has hurriedly placed a drop-cloth underneath him) to stop the dastardly tractors? Will Shirley MacClaine reappear having a change of fiscal heart and save the abbey with her foreign largesse? Does Lord Grantham head to London for a much-needed executive MBA at the London School of Economics? Will he pass the courses? And/or will the grieving Lady Mary toss aside her damp hankies and get her fingernails a bit dirty to revive her portion of the great, green English countryside as her dearly-departed husband championed? Tune in and find out starting on January 5. Onward to the past...

Sunday, December 15, 2013

AN ECONOMIC TOUR OF THE ENGLISH COUNTRYSIDE, STARRING DOWNTON ABBEY


Home wasn't built in a day. ~ Jane Sherwood Ace



Ah, the English countryside, I guess there's nothing really like it. Many Americans have gotten to know this form of greenery because of Downton Abbey, the successful BBC TV show that will commence its 4th season in the US 3 weeks from today.

I've been fascinated with the show not only because of the story and personalities, but because of the times in which it takes place – before and after the First World War. For the "great English country houses" the late 19th and early 20th century was a period of significant economic change and challenge.

Here's my 2-act tour of the life and times of English country houses (aka, estates), and the people who lived in them, like Downton Abbey, from an economic vantage point.

Act I starts with the house itself. Its name, Downton Abbey, implies that at one time in the distant past it was an abbey – a religious monastery, convent or priory. Henry VIII's Dissolution of the Monasteries in the early 16th century disbanded such Catholic land-holdings and appropriated their income and assets. As you may remember from a long-ago history class, he did this after Parliament made him the Supreme Head of the Church of England in 1534, thus separating the English church from the Catholic church and Papal authority. Many of these ecclesiastical properties were provided to friends of the King and converted into private homes. Downton Abbey may have been one of these places.

In real life, TV's Downton Abbey is actually Highclere Castle which is part of a 1,000 acre estate in the north-central part of Hampshire, in southern England. According to Lady Carnarvon, the mistress of the home, Highclere Castle has probably 200 or 300 rooms, 50 to 80 bedrooms and costs $1.5 million a year to maintain. She's also mentioned that if you know exactly how many rooms are in your home, you probably don't have a large house. Love the British, don't you?  

The underlying economics of Downton Abbey (DA) is historically founded on feudalism first begun in ancient times (probably by the 9th Century). This system continued for centuries in Europe and what is now the UK. Like other landed gentry, DA's Lord Grantham owned all the estate's land, including its villages and towns; a relatively small portion was his demesne. By the turn of the 11th century, an agricultural estate – which referred to virtually all estates in England since about 90% of the population lived and worked on the land at the time (the same percentage that lived on the land in the 18th and early 19th centuries) – depended on slave labor (aka, indentured servants and farmers).

In a very real sense, the landed gentry depended on slavery - for centuries. Estates were built around the authority of the lord of the manor/estate.[1] The Old English word "Weallas", or Welshman, was one of the English words for slave. The indentured farmers provided a portion of their produce as payment in kind and/or of their time to the lord. In return for these payments, the indentured, common folk received room and board from the lord. These indentured people included: the cottager, someone who farmed at least 5 acres of the lord's land, and paid for this by working for his lord every Monday in the year, as well as for 3 days a week in August, as the harvest approached; the shepherd, who could use 12 nights' dung (the invaluable natural fertilizer) at Christmas and also could keep the milk of his flock for the first 7 days after the equinox; and the ox-herd (the man who operated the ox that powered the plow – probably the most important person working the land), if he had his own cow he could pasture it with his lord's oxen and cows.

In more recent times such people have been called "tenant farmers." In 19th century England 90% of the land was tenanted; by the mid-20th century 60% remained tenanted.[2]

This formidable agriculturally-based economic system began to splinter in the late 18th and 19th centuries, when the Industrial Revolution was structurally altering England and subsequently the world. This revolution changed English (and most other western nations') agriculture, not just industry. My blog, The Agricultural Revolution, discuses how this revolution actually facilitated the Industrial Revolution. The movement of agricultural workers (aka, peasants) off the farms into the cities - and new factories - wasn't necessarily a disaster for agricultural estates or their owners because of increased farm productivity. Productivity gains were realized through mechanization. These benefits more than made up for the reduction in the mostly low-skilled agricultural work force.

By the early 20th century - when we are viewing DA - the technical scale of agricultural production had significantly grown. Smaller farms, presumably like those at DA, were increasingly inefficient, mainly due to their size and inability or unwillingness to utilize modern methods. In my mind, this is the principal source of tension between Lord Grantham and Matthew (RIP). Matthew knew that farms based on centuries-old tenancies and techniques that had existed at DA seemingly forever were no longer going to work because the farms were not large enough to support WWI-era agricultural methods and technology, like the then-new internal combustion engine tractor and its yield-improving accouterments.

Revenue that Lord Grantham received from the townspeople – probably a portion of each merchant's sales – was not likely to be sufficient to make up for the fiscal challenges he faced from his farms. Retail sales in England, including DA, were indirectly and adversely affected by the Bank Panic of 1907. This panic was principally a US calamity, due in no small part to the 1906 San Francisco earthquake. But the Bank of England had to raise its interest rates, partly in response to English insurance companies paying out so much to US policyholders, which landed financial blows to the British economy. Lastly, the British government began to change its fiscal policies to focus on generating more tax revenues from the considerable wealth accumulated in estates like DA. Taxes steadily increased during the 20th century and included land, income and probate taxes as well as death duties. Given his situation, it is likely that Lord Grantham would feel in complete accord with George Harrison's final lyric in Taxman, "And you're working for no one but me."

Coming soon, Act II will delve into events during the 19th and 20th centuries that further undermined the foundations of the tried-and-true British upper class, including Lord Grantham and Downton Abbey. No wonder he has such an enduring dour expression.



[1] See The Year 1000, What Life Was Like at the Turn of the First Millennium, Robert Lacey and Danny Danziger; Little, Brown & Co.,1999.
[2] According to the recently-published Global Slavery Index, 4,200 people remain in modern slavery in the UK today.