173

5th July, 1928

PERSONAL & CONFIDENTIAL

My dear Prime Minister,

BUSINESS MISSION

On Monday last I got Duckham [1], Walter Elliot [2] and Casey [3] to lunch with me in order that Duckham and Elliot might meet and have a useful and intimate talk. The conversation was chiefly about the economic importance of the pastoral and agricultural industries of Australia and Elliot very strongly supported the suggestion that I had previously made to Duckham that the Business Mission should see Dr. Orr [4] as soon as he returned.

Duckham warmly agreed and indeed said that if the meeting of the mission with Orr proved very fruitful, he would try to run up to Aberdeen and have a further personal talk with Orr during August.

Duckham made it clear that he feels that the Business Mission has a totally inadequate knowledge of the agricultural side of the problems that they will have to discuss and he is most anxious to obtain a good grounding in the matter before he leaves.

I would very strongly suggest that, as soon as possible after the Mission arrives in Australia, Dr. Richardson [5] should be given an opportunity of discussing with them at very considerable length the position in regard to agricultural crops. I do not think there is anybody who is as sound on this subject as Richardson and he is certainly no pessimist but rather a sane and reasonable optimist.

On Tuesday evening the British Electrical and Allied Manufacturers' Association (BEAMA) gave a dinner to Duckham and Sir Hugo Hirst [6], the main Toast being 'Imperial Development' proposed by Amery [7] and seconded by Sir Granville Ryrie. [8] Neither speech was in any way effective. Duckham and Hugo Hirst replied and I am enclosing the brief 'Times' report of the dinner and also an interesting verbatim report of Hugo Hirst's reference to his mission to Australia in his Annual Report to the Shareholders of the General Electric Company. [9]

At the BEAMA dinner both Duckham and Hugo Hirst showed clearly that they had a proper idea of the work of the Mission.

I am meeting the Mission formally on July 16th and shall make a point of having a long talk with each individual member before they leave.

SIR CHARLES NATHAN [10]

Owing to my illness, I had not been able to see anything very much of Sir Charles Nathan until he dined with me last week, when we had a long evening's talk, which interested me very much from a number of points of view.

Nathan put the difficulties in front of the D. & M. Commission very clearly but I feel that, under all the circumstances, it is probably necessary mentally to modify some of the views that he expressed. He showed the greatest enthusiasm for the work of the C.S.I.R. Naturally we got into a discussion of Australian economic development and he said that it did not matter very materially how we used the tariff so long as, through the tariff, we created new industries.

I told him that I thought that this view was only tenable on the basis of Australia being able to borrow almost unlimited sums of money without serious difficulty and that, although increased cost of production due to a high general tariff might not affect the possibility of Australia exporting wool and wheat at a profit, yet if Australia was really to develop at a more rapid rate, it was essential that other export industries, such as the dairying interest, for example, should be on a profitable basis.

Nathan then put forward what is a very normal point of view, namely that Australia's rate of development of 2% per annum was really very satisfactory and compared favorably with that of other countries during their equivalent stage to that in which Australia is today. I wonder really whether that point of view is sound. You have in Australia 6 million really virile people who, in the year of grace 1928, are armed, or ought to be armed, with all the inventions of science to assist them in the more rapid development of their country. I think that idea is one of great interest and one which you might find extremely useful in some speech in Australia. I, therefore, propose, if possible before the next mail, to elaborate the idea somewhat and forward it to you.

BRITISH ECONOMIC POSITION

In spite of what really appeared to be a better economic outlook in the first four months of the year, 1928 is reverting to post- war type and the extreme optimism with which the Government and the Bankers, and indeed the business community, generally welcomed 1928 is giving place to realisation that the year is not going to see any substantial improvement in trade. The unemployment returns show that there are over 120,000 more unemployed now than a year ago and I am confidentially informed that the Government anticipates a further substantial increase in unemployment during the latter half of the year. I have also been told in confidence that the report of the Industrial Transference Board [11], which consisted, as you will probably remember, of Sir Warren Fisher [12], Sir John Cadman [13] and Sir David Shackleton [14], is going to approve a document which will not assist. It seems clear to me that schemes for the transference of men, either within the United Kingdom or for overseas settlement, are rather hopeless and that we should all be well advised to talk less and less about the re- distribution of population and more and more about the importance of development. If we can once persuade the people of this country that it is to their direct economic advantage to throw all the energy, capital and brains that they can spare from internal affairs into the development of the most promising parts of the overseas Empire from a developmental point of view, then we shall automatically achieve the transference of population which is making such dreadfully slow progress while we think in terms of migration rather than of development. This I know is your own point of view but I am not at all sure that the time has not come when it is necessary to say it even more definitely than it has been said in the past. Perhaps the Business Mission on its return may be able to put that point of view through with authority but not as the scribes; in other words to put it forward as a considered business point of view and not as a Government statement.

POLITICAL

Nothing that has happened recently, either in the House or in By- elections, has given any clear point of view on the political situation. There is little doubt that the Budget and the Rating Bill [15] are the first really constructive measures which the Government has taken to assist the industrial situation and on the whole my impression is that they are being well received and that, as a consequence, in spite of the serious economic depression, the Government may be able to go to the country in a year's time and claim to have been the only Party able to bring forward a definite constructive programme from a realist's point of view. On the other hand, there seems little doubt that Rothermere [l6] is going to maintain his vendetta against Baldwin [17] and may, for this purpose, form a definite alliance with Lloyd George [18], bringing the whole of the Rothermere press to the support of L1.G. It is extremely difficult to gauge the value of an alliance of the Rothermere Press.

My own fancy is that the stunt press, when suddenly mobilised on a stunt such as the Zinoviev letter [19], has a very marked effect on votes but I am much more doubtful whether the consistent campaign of calumny undertaken by the Rothermere press over a period of years does not, on the whole, improve the electoral chances of the victim. One fancies, and indeed hopes, that the public mind recognises the rotten motives of the press potentates and their satellites when sufficient time is given for the whole campaign to sink into the public mind.

The Labour Party are once again in an extremely difficult position owing to the revolt of Maxton [20] and the fact that the I L.P.

are, on the whole, supporting him as their Chairman. I do not think Maxton will get much support in the Parliamentary Party and, after all, there is a full year before the election and the crippling effect of the revolt may have been dissipated before that takes place. Nevertheless I cannot see any strong probability of a great swing of votes towards the Labour Party.

So far as the Liberals are concerned, here again one can see no sign of any real Liberal revival and the Lloyd George-Rothermere alliance, while it might swing a certain number of the unattached into the Liberal camp, would probably horrify Asquithian Liberals [21] and intensify their smouldering dislike for L1.G., with the result that many respectable Liberal votes would be cast for the Conservatives, as certainly happened in 1924.

On the whole one is inclined to feel that the probabilities of the moment are that the Conservatives, while losing a very considerable number of seats, are likely to be returned to power with a small majority.

THE HIGH COMMISSIONER FOR NEW ZEALAND

I cannot refrain from drawing your attention to a most extraordinary, request that I received from Sir James Parr the other day. I am enclosing a copy of a letter [22] which his Private Secretary sent to me, because I feel sure that it will amuse you. I cannot imagine how the High Commissioner of a Dominion could so insult his own office as to send out, through his official channels, a request to me to assist him in preparing an article of the sort mentioned. I was also intensely amused by Sir James Parr's note 'I am very busy!' My first inclination was to write back merely saying that I was possibly busier but I finally decided to throw a few notes together which I sent back to Parr with the comment that pressure of work prevented my making them more elaborate. [23]

Yours sincerely, F. L. MCDOUGALL

1 Sir Arthur Duckham, chemical engineer prominent in the coal industry; leader of the British Economic Mission to Australia 1928.

2 Parliamentary Under-Secretary for Scotland; Chairman of the Research Grants Committee of the Empire Marketing Board.

3 R. G. Casey, Commonwealth Government's Liaison Officer in London.

4 J. B. Orr, Director of the Rowett Institute for Research in Animal Nutrition, Aberdeen. Orr was then visiting Australia.

5 A. E. V. Richardson, Professor of Agriculture and Director of the Waite Agricultural Research Institute, University of Adelaide;

member of the Executive of the Commonwealth Council for Scientific and Industrial Research.

6 Chairman and Managing Director of General Electric Co. Ltd;

member of the British Economic Mission to Australia 1928.

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

8 Australian High Commissioner.

9 Both published in the Times, 4 July.

10 West Australian businessman; Vice-Chairman of the Commonwealth Development and Migration Commission 1926-27.

11 Appointed by the Minister of Labour, Sir Arthur Steel-Maitland, on 6 January 1928, to facilitate 'the transfer of workers, and in particular miners, for whom opportunities of employment in their own district or occupation are no longer available'.

12 Permanent Secretary of the Treasury and Head of the Civil Service.

13 Mining engineer; Chairman of Anglo-Persian Oil Co.; member of the Council of the Department of Scientific and industrial Research.

14 Labour M.P. 1902-10; Chairman of the National Labour Party 1905; President of the Trades Union Congress 1908, 1909; Permanent Secretary, Ministry of Labour, 1916-21; Chief Labour Adviser 1921- 25.

15 The Rating and Valuation (Apportionment) Act 1928 relieved agricultural undertakings of the obligation to pay rates and reduced rates payable by industry and railways by 75 per cent.

Local government was thereafter financed partly by government grant, so that, in effect, the ordinary taxpayer relieved British industry and agriculture of financial burdens. Winston Churchill, Chancellor of the Exchequer, considered this method of increasing Britain's competitive position more acceptable than a tariff.

16 Lord Rothermere, Chief Proprietor of the Daily Mail, Daily Minor and London Evening News.

17 Stanley Baldwin, Prime Minister.

18 David Lloyd George, Prime Minister 1916-22.

19 See note 19 to Letter 151.

20 James Maxton, M.P., Chairman of the Independent Labour Party, had signed, without reference to the ILP Executive, a manifesto condemning a series of conferences between leading industrialists and unionists. His action caused dissension within the ILP and tension between the ILP and the Labour Party.

21 See note 5 to Letter 3 22 Not found.

23 The letter involved a request to Sir James from the Australian and New Zealand Journal.