How Downton Abbey Destroyed England

Downton Abbey

I admit it.  We’re hooked.  We never miss an episode of Downton Abbey, a sweeping soap opera filled with complex characters that takes place in early 20^th Century England.  It’s the latest offering from Masterpiece Theatre who gave us Upstairs, Downstairs a generation ago. 

When we aren’t wondering what will happen next…

Will eldest daughter, Mary, marry the heir to the estate? (She did)  Will youngest daughter, Sybil, run away with the chauffer? (She did too)  Will Lord Grantham’s valet go to jail for murdering his wife? (No surprise, he did!)

….. we are marveling at the presentation of  British manners and the class system. 

Now in its third season, we find ourselves in the 1920’s.  It was a time of social change and lots of dialog is devoted to the pending breakdown of the British class system.  Maggie Smith, playing the grand dame of the family, offers comic relief as well as context.  When she first hears the word “weekend” she asks, “What is a week-end?”.   Presumably, all days are the same if you have never done a day of honest work in your life.

But, all this clinging to tradition strikes me as more than a bit odd given the decade in which this melodrama takes place.  This was the Roaring 20's  in the U.S.  And, these blokes are going on and on about how they have an obligation to “provide jobs” for the lower class workers who live in their house and reside on their estate.  This, apparently, is part of the rationale for hanging on to the estate no matter what the obstacles may be.

During the 20’s, the implementation of mass production techniques drove down wholesale prices and increased industrial production in the US.  Meanwhile, the British economy stagnated.  While the dukes and duchesses were providing jobs to valets and ladies’ maids whose profession was to help their masters get dressed a couple of times a day, their counterparts in the US were putting people to work in factories, producing washing machines, radios and cars. 

Actor Hugh Bonneville as Lord Grantham

An analog often used in teaching economics is that of the “last buggy whip manufacturer”.  He tends to his trade and makes good money even while people are buying cars en masse. When there is no longer a demand for his product, he goes broke.  It’s a simple way to explain the effect of innovation.  Austrian economist Joseph Schumpeter called it the Law of Creative Destruction. 

Think of what email and FedEx have done to the Post Office and you’ll understand it easily.  Or, trace the evolution in the music industry from vinyl records to cassette tapes to compact discs to MP3 players.  Embrace innovation or go out of business.

In an early episode of Downton this season, the Earl loses most of his fortune in a bad investment.  His new son-in-law, the heir to the estate, invests a large inherited sum not in an industrial enterprise or even in bonds but rather in the estate, Downton Abbey.  All are relieved that the grand tradition of the British upper class may  be preserved.

And it will be.  Until they make the last buggy whip, that is.

The Land of Perfect Weather

I knew where I was flying to of course.  But, even if I hadn’t, I got my first clue when I stopped to buy a bottle of water in the airline concourse.  Ten percent sales tax!  I must be in California, the land of perfect weather…  and high taxes.

I have written about the "has-been" state before.  A study by the Federal Reserve Bank of San Francisco revealed that California’s non-farm employment growth has lagged that of low tax, low cost states like Texas substantially.  The bank’s president said, “Economies of states ranked high on tax-and-cost indexes [meaning lower taxes and costs]…  tended to grow faster than the states ranked lower”.

California is not alone as a high cost state.  On my recent visit to the Finger Lakes region of NY, I watched CNBC diva Maria Bartiroma emcee the presentation of over $700M in state government grants to developers throughout the state.  Presumably, these are projects that did not offer sufficient return to attract private capital.  The Finger Lakes (western NY) garnered the largest share, $96M, which was cheered by local business leaders – you know, those free market Republicans who don’t like government interference.  Those I spoke with pointed out that the region got none of last year’s freebies.  As for the free market?  “Well, they’re going to give it away anyhow.  At least we got our share,” said one.

New York has the highest amount of public debt per capita in the country, over $13,000 for every man, woman and child who lives in the state.  It’s a shame that no one thought of the option of keeping $700M in the state treasury and either lowering taxes or paying off some debt.

Meanwhile, Californians are headed for the exits.  Despite high tax rates, state revenues are falling and Spectrum Location Solutions, a company that tracks corporate relocations, has documented over 250 corporate departures last year.   In addition, they have cited a loss of more than 15% of financial services jobs in both Los Angeles and San Francisco that have been transferred to other states.  In fact, all of our high cost, high tax traditional financial centers – New York and Chicago in addition to the two California cities – are losing such jobs according to a report by Moody Analytics.

Meanwhile, states like bordering Arizona are targeting California companies to convince them to relocate to their low-cost, low-tax state.  But, they may be late to the party.  The US Census Bureau reported that California’s coastal cities – San Francisco, Los Angeles and San Diego – have lost over 2.3M people people since the turn of the century.   The Orange County Register cited high cost of living, high taxes and onerous business regulation as the key drivers of the trend.  To make matters worse, the state has passed a new land use law (SB375) that will force people to live in densely populated areas to reduce sprawl and pollution.  The law requires housing density of at least 20 units per acre and easy access to mass transit.

The tyranny of a one party government – no matter the party or which government – generally leads to folly.  In the case of California, the folly is Blue State utopia.

Well, at least the weather is great.