92

2nd February, 1928

PERSONAL AND CONFIDENTIAL

My dear P.M.,

Philip Kerr [1] has recently returned from a trip to the United States and Canada and has had a long talk to Hankey [2] about it- the gist of which was as follows.

The Washington Conference to reconsider the Naval Disarmament position must meet some time about 1930. The ground must be prepared for this Conference at (and before and after) the Imperial Conference in 1929. By 'preparing the ground' he means getting the Americans to come to some sort of reasonable standpoint with regard to this important question of blockade rights [3] as between America and Great Britain. He thinks that careful work in the next two years will straighten out people's ideas about it. No one knows at present what we want and what the Americans want.

He thinks that Canada can play a big part-a big Imperial part-in this potential source of friction between the United States and this country. We have been saying for some time that Canada can and should be interpreter and honest broker between the United States and Great Britain by reason of its position and its understanding of American thought processes. Here is a first-rate opportunity for Canada to do something really useful in this role.

The lines on which they should set about it, he suggests, might be as follows.

The Americans are particularly keen about the implementing of the scheme for the joining of the Great Lakes with the sea, for the passage of seagoing ships, by deepening and canalising the St.

Lawrence River. Canada is at present only half-hearted about it.

The 'Hoover Commission' [4] report shows how keen the Americans are on the scheme. Their summarised conclusions were as under:-

1. The construction of the shipway from the Great Lakes to the sea is imperative.

2. The shipway should be constructed on the St. Lawrence route, provided suitable agreement can be made for its joint undertaking with the Dominion of Canada.

3. That the development of the power resources of the St. Lawrence should be undertaken by appropriate agencies.

4. That negotiations should be entered into with Canada in an endeavour to arrive in agreement upon all these subjects.

What Philip Kerr suggests, in short, is that Canada should do a deal with the United States, granting them the facilities (with whatever reservations are necessary) for carrying out the St.

Lawrence scheme, in exchange for a reasonable arrangement with the British Empire on the question of blockade rights.

This sounds rather crude when put bluntly, as I am constrained to put it, in this short letter for want of space on my part and patience on yours.

The Americans, vide Philip Kerr, are so keen on the super- industrialisation of the area just south of the Great Lakes on the Canadian border-New York State and Pennsylvania in particular-that they will, he thinks, go a long way with Canada in order to get what they want-cheap sea freight from the Middle West to the Atlantic through the Great Lakes and St. Lawrence waterway-added to cheap hydroelectric power which will be a by-product of the St.

Lawrence scheme.

Kerr thinks that there has been a considerable revulsion of feeling in Canada in recent years and in particular since the 1926 Imperial Conference -towards the Empire and away from the United States. [5] It is beginning to be borne in on them that their bread is buttered on the Imperial side rather than on the American side.

Kerr talked to Mackenzie King [6] about the above scheme and apparently got quite a good reception.

So here, for the first time I think, one gets Canada suggested as coming into the real Imperial sphere. It is only Kerr's suggestion as yet, but he gets his ideas well round amongst people who count and it may well come to something.

However, it may also well be that Canada will not be content to barter away her domestic peace of mind for an Imperial benefit. In the notes on an address by a prominent Canadian that go to you in another letter by this mail, I set down his ideas of the other side of the picture-the potential disadvantage to Canada by reason of this proposed St. Lawrence waterways scheme.

An unfortunate episode has come to light in this last week. A city financial house is in course of proceeding against a certain Mrs.

Dyne for the recovery of about 40,000 said to have been lost by her in the course of buying and selling French francs and other foreign currencies. [7] She is pleading the Gaming Act. The bad part of it is that the cross-examination has brought out the fact that several men in the Foreign Office had been associated with her in some of the transactions-notably Gregory [8], who, as you know, is Assistant Under-Secretary of State and the third man in the office. It was stated in the evidence that he had lost 9,000.

The public will naturally be led to assume that he made use of official information both on his own account and in the course of the 'advice' that he is said to have given Mrs. Dyne over a fairly long period. The answer, of course, is that the official information cannot have been much good to him as the final result was a heavy loss. However, this will not still criticism. The Foreign Office is rather on edge about it all and there is much speculation as to what is going to be done about it. Gregory may have to go or he may be sidetracked. It won't do the prestige of the office much good, especially in France.

I enclose the 'Times' reports of the above Case to date, as a matter of interest rather than importance.

In the course of a conversation with Sir Hugo Hirst [9] a few days ago, I asked him how the 'Mond' conference [10] between employers and employees was progressing. He said that, in his opinion, it was the sort of conference that was of great value while it was sitting and that, for his part, he would try and ensure that it sat five years. One can see his point.

He made another interesting remark in this connection, rather too obscure for me to see the real point, but I got his general drift.

He said that it was his experience that both ourselves and the Germans had one quality particularly in common. If there were two notice boards, one with the inscription 'This way to Heaven' and the other 'This way to a Lecture on How to get to Heaven'-we would always choose the latter!

Low [11], the Australian cartoonist (who made his name in the 'Sydney Bulletin') is in course of making a very good place for himself in this country. He did a series of particularly good cartoons of leading people in this country for the 'New Statesman' a year ago-J. H. Thomas [12], Lloyd George [13], etc. He is now cartoonist for the 'Evening Standard'. I enclose two of his latest efforts that are particularly apt. 'The High Priests deliver the Oracle' is, I think, very nearly perfect as a cartoon. It came out just as the yearly pronouncements of the 'Big Five' bankers [14] were thundering out. The other-featuring J. H. Thomas-is in answer to a 'Conservative' who wrote to the 'Evening Standard' following an earlier cartoon of J. H. Thomas, saying that he thought this sort of thing was in bad taste and fostered class feeling. The answer is that J. H. Thomas is delighted with the cartoons and they are done with his knowledge and consent.

Hankey thinks that the domestic negotiations in departmental circles in London in regard to blockade rights are coming round to his point of view -that we should do nothing in the way of initiating conversations with the Americans for twelve months at least. Philip Kerr has talked at length to Chamberlain [15] on the lines of the necessity of doing nothing prior to the Presidential election. Kerr thinks we should let them get their Bill safely through Congress regarding the new big Navy, as anything we do in the meantime, if it became public, would be taken as an attempt to influence their decision in this domestic matter. In any event, as we're not building against the Americans, it doesn't greatly matter what they build, or rather make plans to build. And they will be in a much more complacent mood to discuss blockade rights when the Bill has become law and they are, in their own eyes, well on the way to complete parity with us. And besides, it isn't much use opening conversations with this administration that may have to be started all over again if a new party succeeds to the Presidential chair.

So that I think you can take it that the matter will not actively be taken much farther than it is for a year or even possibly two years from now.

I don't know whether you have read any of the works of Andre Siegfried -'Postwar Britain', 'America comes of Age', etc. They are regarded by those competent to express an opinion as being extremely acute summaries of the life, present position and tendencies of these countries. He is a French historian who, by the above and other books, has reached a high position amongst contemporary publicists. To indicate his style and something about him, I enclose an article by him from today's 'Times'. Personally, I have read only the above two books and was greatly interested and entertained by his penetrating remarks. Would it not be a good thing to get such a man to go to Australia and tell us what he makes of us and where we stand in the world? As has been said, the nearest thing one can get to the judgment of posterity is the objective judgment of an intelligent contemporary foreigner. I hope to meet him in the near future and to have an opportunity of putting the idea of Australia into his head. Both the above books, by the way, are in the External Affairs Library in Canberra. Even if you don't read them all, it would interest you, I think, to look through his chapters (in 'Postwar Britain') on the Empire, and to skim through the American book.

P.B.B. Nichols [16], the Foreign Office man who goes to New Zealand as Liaison Officer, will just about be approaching Canberra with a view to meeting you, as this letter arrives. He is a thoroughly good fellow and I hope you'll be able to talk to him a little.

The question is in the air of who is to be sent to Canada as British High Commissioner. The papers have got hold of the name of E. J. Harding [17] (recently ennobled by a K.C.M.G.) but I don't think this is correct. [18] I know that the Prime Minister [19] has promised Chamberlain that it shall be a Foreign Office man and not a man from the Dominions Office, and that Amery [20] has been telegraphed to in Canada, saying not to commit himself on the subject in any way while he is there. He is to be a fairly senior man, I know, Counsellor or Minister, and there are not so many suitable men about. A man is wanted who will be able to do the technical part of the job, who is presentable, who can speak in public, and who can compete at least on equal terms with the American Minister at Ottawa.

If you wish to see a short, easily readable account of the general situation in Mexico, you will find this in F.O. print that goes to you by this mail, A.60/60/26 (Section I of January 3rd, 1928).

I send copies of two important documents to you under cover of separate letters-the Defence of India report (with supporting documents) and the Report to the South African Government on their Coast Defences. Although I have made several references to both these documents in previous letters, the final approved print has only just come from the Foreign Office printers. I send two copies of the South African Coast Defence Report as you may wish to let Defence have a copy at once. What I said in my personal letter to you of 12th January, regarding Coast Defence, still holds good and I will not repeat it here. [21]

I am sending you a personal letter by this mail on rather a large subject-the influence of international finance on peace and war.

It sets out merely to state what I want to discover, or rather the points on which I hope to get some light, as they cannot be categorically answered. I have made appointments to see Hawtrey [22] and Niemeyer [23] of the Treasury, and have written to Montagu Norman [24], so that in the course of the next week or so I may be able to send you a record of their views. I take it that it would be of interest to you to get the views of experts on this general type of subject which normally never comes into the light of day. Before I launched into this enquiry, I took draft of it to Hankey and, through Hankey, to Winston Churchill's [25] very active-minded Private Secretary Grigg [26]-both of whom agreed that it would be particularly interesting to get some good views on the subject.

Since I have been back in London I have adopted the principle of sending you rather longer or fuller personal letters than heretofore. I have gone on the supposition that you haven't time to read the collection of 'Dear Sir' letters that I send, so I now make it a practice to give you in brief form in this personal letter anything to which your attention should be drawn from amongst the other letters that I write-together with a good deal of quite indiscreet news that comes my way in the course of the week. I regard these personal letters as a medium in which I can say what I like without fear of ever being called to account for it. I do not know whether you show them to Henderson [27] or not.

I would be glad to know if you like this procedure or if the volume of what I send is tending to become burdensome.

The number and volume of the letters addressed 'Dear Sir' in recent weeks has reached colossal proportions I am afraid.

I am, Yours sincerely, R. G. CASEY

1 Secretary of the Rhodes Trust, later (as Lord Lothian) Ambassador in Washington 1939-40.

2 Sir Maurice Hankey, Secretary to the Cabinet.

3 See Letters 78 and 81.

4 The St Lawrence Waterway Commission. Its chairman, Herbert Hoover, was subsequently President of the United States 1928-32.

5 Casey is here using 'revulsion' in the sense of 'change'.

6 William Mackenzie King, Canadian Prime Minister.

7 The case arose out of a suit by a banking firm against Mrs A. M.

Bradley Dyne for 39178.1.3 lost in currency speculation.

Speculation by officials emerged during the hearing. Sir Miles Lampson. Minister to China, was mentioned but his offered resignation was not accepted. See also Letter 93.

8 J.D. Gregory, Assistant Under-Secretary at the Foreign Office.

Because of his involvement in the case, he was dismissed later in the year. Mrs Dyne had been Gregory's secretary some years before.

9 Chairman and Managing Director of the General Electric Co. Ltd.

10 In November 1927 the Trades Union Congress General Council accepted an invitation from Sir Alfred Mond, Chairman of Imperial Chemical Industries, Lord Weir, a Scottish contractor, and eighteen other leading industrialists, including Sir Hugo Hirst, to discuss co-operation in the development of British industry. A series of useful, informal meetings began in January 1928, petering out in 1929 when the re was a switch to more formal, and negotiations between the T.U.C., the Federation of British Industries and the National Confederation of Labour.

11 David Low, a New Zealander, creator in Britain of the 'Colonel Blimp' character and famous in Australia especially for his caricatures of W. M. Hughes.

12 General Secretary of the National Union of Railwaymen; Colonial Secretary in the Labour Government of 1924.

13 David Lloyd George, Prime Minister 1916-22.

14 See note 3 to Letter 25.

15 Sir Austen Chamberlain, Foreign Secretary.

16 P. B. B. Nichols served in New Zealand 1928-30.

17 Sir Edward Harding, Assistant Under-Secretary at the Dominions Office.

18 Sir William Clark, Comptroller-General of the Commercial Intelligence Department at the Board of Trade was appointed Britain's first High Commissioner to Canada in September 1928.

19 Stanley Baldwin.

20 Leopold Amery, Secretary for the Colonies and for Dominion Affairs.

21 See Letter 88.

22 R.G. Hawtrey, Director of Financial Enquiries at the Treasury.

23 Sir Otto Niemeyer had recently resigned as Controller of Finance at the Treasury to become an adviser to the Bank of England. He led a Financial Mission to Australia in 1930 to advise the Australian Government on its economic management.

24 Governor of the Bank of England.

25 Chancellor of the Exchequer.

26 P.J. Grigg, Principal Private Secretary to successive Chancellors of the Exchequer 1921-30, and later (as Sir James Grigg) Secretary for War 1942-45.

27 Dr Walter Henderson, Head of the External Affairs Branch. In a letter to Casey of 19 March (on file AA:A1420), Bruce stated that some of Casey's private letters were shown to Henderson but not those dealing with, for example, the royal family. Bruce suggested that in future Casey might put 'Confidential' on letters which in his view Henderson might see, and 'Personal and Confidential' on those meant only for Bruce's eyes. Bruce noted that those shown to Henderson 'are returned by him immediately after he has read them, and nothing is put on to the official files ... the contents are not of a character to be left on permanent records for the use of my successor'.