Downtonomics: A fictional estate’s troubles echo in the modern world
02/14/2014 5:48 PM
02/14/2014 5:48 PM
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 the cook, 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 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. Patmore’s assitants, 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.
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.
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 Crowley 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.
It’s the overarching theme of the show: the crushing tax burden that threatens Downton and forces 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 email. “We fans naturally root for the family to hold onto 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.”
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.”
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, 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.
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.
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. 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 Grantham, who lends him the money to repay the delinquent rent his father ran up.
8 Can an old lumbering enterprise recreate itself for a new economy?
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. 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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