Tolkien spent his early childhood in the Warwickshire/Cotswolds countryside, which is still known for its beauty today, so must have been even more so back then. The Shire represents that region. Then his family was forced to move into Birmingham, England's 2nd largest city, which would have been a real "smokestack" place then, as it was cheaper. He always resented the move and missed the countryside, and I think that's apparent in the books. The Shire is definitely an idealised English countryside, just look at the honour accorded to gardeners!!!
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