Downton Abbey Economics

by John on October 14, 2012

Celebrating the Height of Empire as Queen Victoria Opens the Great Exhibition of 1851

How much do Public Broadcast Service viewers understand about the economy that led to the lifestyle of the wealthy Edwardian-era family in the hit series Downton Abbey? If one watched only PBS historical dramas, the British history leading up to the Abby era seems to run to the understanding that Horatio Hornblower  (born imaginarily in 1771) and the Royal Navy defeated the French, and somewhere in there, Jane Austen came to her Sense and Sensibility (1811), and didn’t James Watt (1736-1819) invent the steam engine and thus power the Industrial Revolution upon which England built a mighty Empire on which the sun wouldn’t set until World War One came along and upset the elegance and gentility of the Edwardian Era?  Well, there may have been a couple of social issues here and there, along with the Titanic, providing the PBS drama with some good plot points.

The historical truth is markedly different.  The span of relevant history starts out with a major bailout of the landed gentry and the banking system, and ends with the rise of the financial sector providing much of the income for the Downton Abbeys of the time. It progresses through the Industrial Revolution to a late-Victorian English ruling elite that was smug, narrowly educated and scientifically illiterate, rich from the financial sector but with a manufacturing base that had been increasingly starved for the capital to keep up with the technological pace of change.  It spans a time of tectonic social shift from an agrarian economy to one where a rising industrial middle class needed workers for its factories. Because of that fundamental change, the working poor were largely cut off from the land and social structure which produced the food they ate, making them dependant solely on the factories that provided their wages.

The bailout occurred when Parliament passed the Corn Laws, a steep tariff on cheap imported grain   As the eminent British historian Eric Hobsbawm wrote, “The Corn Laws which the farming industry imposed on the country in 1815 were not designed to save a tottering sector of the economy, but rather to preserve the abnormally high profits of the Napoleonic war-years, and to safeguard farmers from the consequences of their wartime euphoria, when farms had changed hands at the fanciest prices, loans and mortgages had been accepted on impossible terms.” The linkage to the sub-prime debacle and subsequent bailouts is obvious. Then, as now, making risky loans based on bubble-inflated real estate was a recipe for trouble.

The costs of the tariffs literally took bread out of the mouths of the newly emerging class of factory workers, who then needed higher wages just to eat. This would mark the emergence of three distinct economic forces: the landed gentry, who at the time controlled Parliament; the rising industrial middle classes, (the true job creators of the time, who at that time did not have the right to vote) who felt that the tariffs were restricting economic growth by forcing them to pay more for workers and thus consume capital for expansion, and third, the working class itself.  Thus, the simplification of social tensions to class warfare between the rich and poor was, and still is, simply wrong . The fundamental battle was the landed gentry against the combined job creators and the working class.  This can be seen from the early 1800’s alliance formed between the workers and the growing class of industrialists.

There were several attempts to formulate social structures to which would bring about political reform.  A significant example was the Birmingham Political Union, whose goal was reform of the House of Commons ‘to be achieved by a general political union of the lower and middle classes of the people’.  At the same time, the Cooperative Movement, largely started by Robert Owen, who operated his mill at New Lanark, was having a significant impact.  (It’s well worth visiting the New Lanark World Heritage site to see the relevance of his ideas to the modern day, including the environment, health and child care, housing, and education.)  Pressure from these social movements, including a mass meeting 200,000 members of the Birmingham Political Union, pressured the House of Lords, afraid of violent social unrest, to pass the 1832 Reform Act.

The Reform Act would extended the voting rights to the middle class industrialists, which lead to weakening of the Corn Law and increasing calls for free trade.  After eventual repeal in 1846, the imports of grain from the prairie farms of North America expanded rapidly, supplying the U.S. and Canada with earnings to buy the output of increasingly industrialized England, led by Henry Maudslay (1771-1831) and his advances in machine tool design such as his screw-cutting lathe, and micrometer, which had made possible precision manufacture and thus mass production. The results were celebrated by Queen Victoria’s multiple visits to the 1,851 foot long ‘Crystal Palace’, which housed the Great Exhibition of 1851, celebrating Victorian manufacturing and scientific prowess.

However, Britain began to rely increasingly on trade, overseas investments and financial and insurance services while starving her home industry of capital improvements to take advantage of subsequent technological advances, many of which were British.  There is no clearer example than that of the steel industry, where the British developed literally all of the major advances, from the Bessemer Converter (1856) to the Siemens-Martin open hearth furnace (1867) to the Gilchrist-Thomas process (1887) which was almost instantly adopted by American steel magnate Andrew Carnegie, who paid $250,000 (a fortune at the time) for the U.S. rights.  By 1910, the U.S. was producing twice the tonnage of steel as Great Britain, who had formerly supplied over half the world’s steel yet was starved of capital to adapt more efficient technology.

When assessing the economics of the time, the educational system is most telling, with the ‘reform’ of the most prestigious boys schools in England, which had historically started as charity schools but had evolved into institutions for the children of the ruling class.  The Public School Act of 1868, by its full title ‘An Act to make further Provision for the good Government and Extension of certain Public Schools in England,’ removed the nine schools, amongst them Eton, Harrow and Winchester, from Crown control and provided each with an independent governing body.  However, despite the recommendations of famed biologist T.H. Huxley, whose famed 1860 debate with Bishop Samuel Wilberforce led to the wider acceptance of Darwin’s Theory of Evolution, Parliament refused to mandate scientific education in the schools.  Indeed, Eton had only added arithmetic in 1836!  Instead the school imbued their students with the Victorian mythology as to Britain’s place in the world.  In 1900, Germany graduated 3000 engineers, while in all of England and Wales, only 250 degrees were granted in scientific and technical fields.

The disastrous effects of the social structure showed up in a working class stunted by decades of malnutrition.  In the 1870s,’s the height of the twelve- year- olds at the prestigious ‘public’ schools was a full five inches taller than that of the industrial students in their separate schools.   When the nation conscripted its soldiers in 1917, this first comprehensive look at the health of the male population showed that two thirds suffered disqualifying disabilities.  Providing significantly improved conditions for the working class, proper nutrition, comprehensive education and, despite the work of reformers like public health pioneer Florence Nightingale, all this and readily available health services were decades in the future.

Thus, the residents of Downton Abbey represent a British upper class that was ill-equipped by education and temperament to enter the 20thcentury, in charge of a country with outdated industry and dependent on increasingly competitive international finance and trade with other rapidly industrializing nations.  England, like Holland and Spain before her, went through the same rhyming pattern of technology and trade, rise of the power of the financial sector, followed by decline.   It is a good question to ask ourselves: where on this timeline where does America stand?.  Does the country celebrate and support the innovative brilliance of the science and technology of a Maudsley or a Darwin, or the deal-making financial sector that preserved the Downton Abbeys for the privileged few? What does the answer mean for our future place in the world?

{ 33 comments… read them below or add one }

Patrick Mulvey October 15, 2012 at 2:08 am

Nothing like a few facts to puncture a good story.
1. Much of the capitalist class had the vote by 1832, the act merely made it easier for them to gradually dominate Parliament.
2. Whilst the repeal of the Corn Laws enabled imports of wheat from the US, it was not until the late 1870s when the effects of cheap imports were felt, largely due to the growing efficiency of the US railroad system and the British merchant marine.
3. The disparity of steel output in the two contries was the ability of the likes of Carnegie to exploit economies of scale behing high tariff walls (28% I believe) to supply demand from US railroad companies. British manufacturers we locked into a system of small runs for a large number of different customers. Consequently, they had no great demand for capital.
4. Until fairly recently, most professionals in England (not Scotland), including engineers, qualified by a mixture of academic study at CATs and Polys and on the job training. Graduate recruitment is a recent innovation. Hence the disparity of engineers from university between England and Germany does not accord with reality.
5. Pioneeering Medical Officers of Health in the 1890s noted the large of birth weight between Herts(a rural county) and Lancashire (an industrial county) leading to longer longevity in the former by the 1980s . I believe that studies revealed that this was due preganant women working in Lancashire as opposed to rural communities.
6. With regard to the last paragraph, why is it that Manchester and Birmingham have reinvented themselves after the collapse of car and textile industries. Is this true of Detroit and west Pennsylvania? I think the same is true of the Netherlands, both in the blue stocking and southern regions.


John October 15, 2012 at 12:58 pm

Thanks for your thoughtful comments, but I would disagree on your first point, as Parliament was only available to the landed gentry prior to 1832. Just look at the size of the voting roles. Hobsbawm’ s “Industry and Empire, The Birth of the Industrial Revolution” is an excellent read, and he, along with Kindelberger’s ‘Commercial Expansion and the Industrial Revolution’ for a more academically focused read. You’re correct on point 2 (see my response to earlier comments) but on point 3, I don’t think we’re in disagreement, however the large international trade would only started with the final death of mercantilism. ( See Hobsbawm) On point 3 and 4, the British steel industry was locked into much of the old guild system of skills, which did indeed make rapid changes in technology difficult, but the invested capital from the City was definitely more focused on trade and finance after 1870 and refused to invest capital in new technologies, so you have a bunch of small producers being displaced in the international market. On point 4, the technical education opportunities were limited by the guild and apprentice system, and Germany had a stated national objective of catching up with the British. (See Hobsbawm again…) I don’t disagree with point 5 either, but the stats on conscription in 1917 tell the tale. As to your last point, I could only cover a specific time span in such a short article, though the economic history post the Edwardian era is equally fascinating.


Patrick Mulvey October 15, 2012 at 3:15 pm

1. Daniel O’Connor was voted in by 40 shilling freeholders. David Ricardo, I believe was the radical member for the City of London. You are right in general, though, since the large magnates effectively “owned” many of the constituencies and put in their placemen. It should be noted that many of these placemen came from middle class families – Peel, Gladstone, Canning, and Burke.
3. Mercantilism probably ended with the abolition of the East India Company’s monopoly in 1842. I would still argue that the vast increase of importation of raw materials and food into the UK began after the 1870s and was due to technological and commercial factors not political.
4. The apprentice system was still quite medieval at the beginning of the nineteenth century but at the latter end of that century it was much more sophisticated due to the growth of polys, technical schools and mechanic’s institutes. The founding of the various professional bodies assisted in this process. Universities in England(not Scotland) had no tradition of working with industry until comparatively recently.
4. Dowlass and Consett were probably among the largest steel producers in the world.
4. Overseas finance and trade was the engine that financed the projects that British steel manufacturers were able to take advantage of – e.g. shipbuiding and railway manufacturing exports. However, they did not have the advantages of economies of scale that American manufacturers had, but had to rely on niche markets.
5. Again I reiterate, from personal experience(I am from a working class family from a rural location), wage rates were far higher in the dark satanic mills in Manchester etc than in rural areas such as Berkshire (the site of Downton)right up to the 1950s and 60s, yet we were far larger and healthier than our urban counterparts.
6. Trafford park was developed in 1896 and Bournville in the 1880s – not even Edwardian.

In general I would beware of listening to Marxist historians residing in the more fashionable parts of London giving their patronising opinions on the working class, from whom they are completely detached. This is one reason why they are disliked by ordinary people and have received little or no political support.


SocraticGadfly October 18, 2012 at 5:26 pm

US grain actually was gaining power by the late 1850s, and in fact, helped offset and push down “King Cotton” during the US Civil War. The efficiency of mechanical reapers and the extension of adequate rail service as far west as Chicago were already in place by this time.


SocraticGadfly October 18, 2012 at 5:28 pm

Oh, and I also believe that British steel’s “problems” and US growth may have been connected, as British authors well knew on copyright, to lack of international patent agreements as well as to US tariffs.

Patrick Mulvey October 15, 2012 at 2:11 am

Apologies about the typos. I am afraid I wrote it in a rush.


Patrick Mulvey October 19, 2012 at 3:36 am

I believe that Carnegie licensed Bessemers technology.


Rickstersherpa October 15, 2012 at 5:13 am

Given the remarkable, and one would almost say willful, scientific ignorance of Mr. Romney and the collection of ideological billionaires and near billionaires who support him, and same ignorance among Evangelical Chistians and Conservative Roman Catholics who Paul Ryan represents, I say that this coming election will be a another significant step down.

Reference President Obama, he is deeply influenced and some way represents a neoliberal Finance wing of the elite, symbolized by Robert Rubin and his friends and associates. They may be socially liberal, and desire a humane and civilized state as opposed to the Social Darwinism of the Right, but economic issues they believed in the paramounce of Finance, deregulation, and that both industrialism and the New Deal were obsolete for America. They advocated NAFTA, WTO, and China’s adminssion to WTO, and then through banks and consultancy, urged the disinvestment in American industry and the transfer of production first to Mexico, and then to China and South Asia based on the lower cost of labor. And of course they huge circulation of funds triggered by huge American current account deficits and Chinese and Asian surpluses gave them a nice middleman’s cut. So in many ways this is an election between bad and worse. But nevertheless one has to make the best choice one can make.


RJStevens October 15, 2012 at 5:13 am

Good on the social side, but the development of industry started much earlier in the beginning of the 18th century.. The key developments for the industrial revolution are iron/steel made from coal (Abraham Darby) and the first steam engines (Trevithick) bother before 1710. Within 50 years, most of the world’s steel was produced in Coalbrookdale. Most of these developments were by non-conformists who were forbidden Oxbridge education. They educated themselves with more modern courses and so the industrial revolution was driven by Birmingham and Glasgow.

Even earlier, England became “modernised” by executing the king in 1649. The monarchy could no longer suppress science and industry in the UK. This liberated thought and led to the scientific revolution (Newton etc).

The UK upper class eventually suppressed all this by marrying the industrialists for money in exchange for “respectability”.


John October 15, 2012 at 12:31 pm

It’s true that the steam engine for pumping mines was developed early on, but it was the development of the railways that had much to do with industrial development, enabling shipment of coal to ports for the export market. It was well into the Victorian era before machine tools and automated production turned to the development of mass produced consumer products for the emerging middle class, many of which were exhibited in all their Voctorian rococco glory at the Crystal Palace. Then, as now, the consumer goods market was a major economic factor.


John October 15, 2012 at 12:34 pm

And, as noted in Downton Abbey, there was a virtual rush of families from America’s Guilded Age flocking to the UK to marry off their daughters (along with healthy dowries) to British nobility, who profited greatly from the cash infusion.


dennis trudeau October 15, 2012 at 6:54 am

Interesting analysis, just one picky point. in 1846 the Canadian prairies were not exporting grain, but Upper Canada (Ontario) and Lower Canada (Quebec) probably were. The Saint Lawrence Valley was Canada’s granary until the Prairies opened up after 1885. I am not sure about the US Mid-West in 1846.


John October 15, 2012 at 12:27 pm

You’re correct on this. Major imports from the prairies would await the development of the railroads and shipping. One could write volumes on the grain trade, the clipper ships, which were actually importing wheat from California, and Brunel’s development of the large steamship, which was largely responsible for making worldwide commodity trading possible. Such trade developed significantly starting in the 1850’s, along with the banking, trade and insurance industries in the City. One can only take a broad brush approach in writing a post like this.


SocraticGadfly October 18, 2012 at 5:30 pm

Also, since there was no “Canada” until 1867, there was no CANADA to export grain before that, and, of course, since the prairies were Hudson’s Bay land before the Dominion, there were no “prairie provinces” either.


Charles Morris October 15, 2012 at 12:29 pm

A few details:

Per one reader’s reply to Mr. Mulvey, US was primarily a cotton exporter per-Civil War. It was the opening of the ‘factory farms’ of the Midwest in the 1870s, and the deepening of railroad coverage that opened the era of large-scale grain export.

Pace, Mr. Mulvey, Carnegie certainly supported the steel tariff, and it was a major support for him in first forays into steel at the Edgar Thomson plant. But in his drive to dominate the US market, by the mid-1880s, the average price of rail quality steel in the US, had been pushed down to about $28/ton, well under British pre-tariff export prices of about $33. During a brief rail recession in 1897, Carnegie drove the price down to $14/ton, and still made a profit.

Every other industry with tariff protection, like sugar and whiskey simply priced, rationally, up to the ceiling imposed by their tariffs, but steel was a major exception


John October 15, 2012 at 1:05 pm

I don’t disagree. Carnegie’s success was based in utterly aggressive use of new technology and less than stirling labor practices. Charles Morris “The Tycoons, How Andrew Carnegie, John D. Rockerfeller, Jay Gould and J.P. Morgan invented the American Supereconomy” is a good read, and there’s lots of scholarly work on the subject


Ptrick Mulvey October 15, 2012 at 3:25 pm

The reason Carnegie could push down prices is due to the vast economies of scale he could exploit due to the railroad orders for steel rails.

British steel manufacturers were niche manufacturers and could not achieve the large runs to exploit economies of scale until the massive battleship orders of the Edwardian era.


Katz October 16, 2012 at 3:37 pm

However, Britain began to rely increasingly on trade, overseas investments and financial and insurance services while starving her home industry of capital improvements to take advantage of subsequent technological advances, many of which were British.

This development is puzzling only if the British investors perceived that the rate of return on investment promised to be higher elsewhere than in British industry.

It is a notorious fact that actual returns on investment are often quite different from projected returns on investment. However, is there any evidence that British investors shunned opportunities in British secondary industry for any reason besides projected return on investment?

If not, then there must have been a financially valid reason to decline to invest in British secondary industry. Famously the Junker class in Prussia invested in German industry. German pursued a policy of tariff protection, as did the US. Is British free trade the culprit?


Ptrick Mulvey October 17, 2012 at 3:33 am

Taking to the two steel companies mentioned above, namely, Dowlais and Consett, Dowlais eschewed a public quote, although they made huge invesments not only in their steel works, but also in infrastructure in the surrounding Cardiff area. This would suggest they were highly profitable and throwing off lots of cash and had no need of a quote. Although Consett was a quoted company, Mr Jenkins was financially extemely conservative and was not very generous with dividends. In addition, he was reluctant to take on bonds or bank borrowings – very wise. Again that company made large investments in the Newcastle area.

With regard to Prussia, I understand Krupp was a private company.


Katz October 16, 2012 at 4:38 pm

Err … I should have typed “did not perceive”. In other words, if investment in British secondary industry was perceived to promise high and secure returns and nevertheless the possessing classes still eschewed that investment, then non-commercial motives predominated.

I know of no evidence that might sustain such an argument.


John October 17, 2012 at 12:20 am

You raise an interesting point inasmuch as investments seem to run in fashions. Also, supposedly secure bond revenue from foreign and insurance investments seem to be a much easier sell, as opposed to speculation on the long term prospects on which major capital investment is based. Look at all the European banks who invested in American sub prime mortgages, based on the promise implied by triple-A ratings.
Keynes is eloquent on the subject of the difficulty of projections of long term investment in means of production. Also, many of the British manufacturing companies were still reasonably profitable, and taking on debt or reducing ownership share in a profitable company to capitalize an uncertain future is something that few of them manage, outside an accurate perception of market shifts. I would conjecture that the lack of new investment in technology might have been more a perception of risk than of return, both on the part of industry and the financial sector.

No real villains, just a tendency to stay in what is perceived to be a well-established comfort zone and ignore future trends. If the late Victorians and early Edwardians hadn’t been so smug about Britain’s place in the world, it might have been different.

Another point, referring to an earlier post, is that the greatest level of income inequality was reached long after the beginning of the decline of British manufacturing.


Patrick Mulvey October 17, 2012 at 3:40 am

The British upper classes were far from smug at this time. Politics raged over the question of imperial preference versus free trade.

In addition, a large naval building program was initiated by the Conservative government and accelerated by the succeeding Liberal government, in response to Imperial Germany’s naval expansion.


Katz October 17, 2012 at 4:20 am

It is true that the political classes of Britain were prepared to spend a fortune of taxpayers’ money on a huge navy.

However, it is also true that British industry was not capable of coping with the demands of modern war. The shell crisis of 1915-1916 marked the beginning of the dissolution of British financial hegemony and the rise of the US as the financial capital of the world. Was this incapability a result of complacency? Or were the demands of modern warfare so unimaginable before 1914 no one in command of a political economy should have been expected to ready a national economy for such a challenge?


Patrick Mulvey October 17, 2012 at 7:19 am

The British establishment did not modernise the navy out of a spirit of me-too ism. I think they were gripped by fear of the threat posed by the rapidly expanding German navy.

The shell crisis arose because many members of the Liberal government were not prepared to organise society to fight a total war. British industry was more than capable of rising to the challenge when Lloyd George took the problem by the scruff of the neck.

None of the combatants worked out the financial consequences of the conflict – not just the British establishment.


Katz October 17, 2012 at 8:07 pm

There is no doubt that, given a war against the German Empire, the money spent on the Royal Navy turned out to be money well spent. Turning the Atlantic into a British lake meant that only the Entente could benefit from the productive power of the US.

But it is necessary to notice that defeat of Germany necessarily entailed dismantlement of British financial hegemony. By the end of 1916 about 40% of the British spend on the war was in North America, with American loans. At this distance in time it is legitimate to contemplate whether the cure was worse than the disease.

However, one must beware of the condescension of hindsight. No belligerent in 1914 could predict the dire consequences of the Great War on the power and prestige of Europe.

How might this set of circumstances relate to the fictional Downton Abbey? The British government committed itself to fund much of the war by taxation. Owners of landed estates were taxed as never before. The Great War proved to be terminal for many great families. However, it might be argued that these folk were not taxed enough. Perhaps a more determined assault on landed wealth and high incomes may have prevented the huge indebtedness of the British state to the US banks.

But then again, to the British governing classes, this solution might  have seemed more grievous than the problem. This is a very tentative conclusion on my part.


Patrick Mulvey October 19, 2012 at 3:32 am

I believe that income tax was 6/- in the pound, which is higher than basic rate is now. In addition companies, and presumably landowners too, were subject to excess profits tax.

After the war, they continued to pay heftily as income tax reached a low point of 4/- in 1930, which is the level of much of basic rate now.


Kate December 11, 2012 at 7:45 am

Was that 6/- in the pound (30%) the base rate, or a top rate? And was there a floor to the structure exempting lower incomes from tax, as there had been in the mid-19th century, or any differentiation based on type of income? I doubt you can say anything very useful about the effects of taxation without going into more of that detail. Since it existed it had an effect, but what, and how much relative to anything else, are hardly simple questions.


Katz October 19, 2012 at 4:56 am

Wiki informs me that Reginald McKenna, Chancellor of the Exchequer during the critical period of the war, offered generous rates of interest on war financing instruments. David Lloyd George, McKenna’s predecessor in the post, and later PM, criticised McKenna for his generosity to the possessing classes when boosting the rate of interest. DLG even spoke darkly of “conscripting” wealth.

One can only wonder how many Downton Abbeys may have survived if DLG had acted on his sentiments.


Patrick Mulvey October 19, 2012 at 11:48 am

Many estates were probably close to insolvency at this time due to American and colonial imports of food. It is doubtful what a wholesale confiscation of these estates would have achieved.


Patrick Mulvey October 19, 2012 at 11:55 am

McKenna was one of the casualties of the formation of the coalition government largely because he was deemed ineffective.

Ironically, he was replaced by a Tory Chancellor of the Exchequer, who pursued a far more aggressive tax poicy. I believe excessive profits tax was raised to 100% and as mentioned above the ordinary rate of income tax was raied to 6/- in the pound.


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