235

4th June, 1929

PERSONAL AND CONFIDENTIAL

My dear Prime Minister,

I was very pleased to receive your long letter of April 30th. [1] It was good of you to give me so interesting a commentary upon affairs and upon my recent letters to you. Naturally I also very greatly appreciated the kind way in which you referred to my work.

If occasionally I can receive a letter from you which enables me to see how your mind is tending on subjects which are of concern to me, I can get along quite happily without expecting rapid responses to my many epistles.

I very much regret that you are finding it necessary to work as hard, or even harder than you did during the previous Parliament.

I can only hope that political affairs will so clarify themselves as to allow you to take things at a more reasonable rate. I hope you are not feeling that the pace is affecting your health, for I am certain that, from an Empire point of view, your influence upon affairs is only commencing and that, given fitness and continuance in office, you will be able to do more than any other person to bring about that closer economic cooperation upon which the prosperity and happiness of so many people depend.

The outstanding fact of the moment is the resignation of Baldwin and the King's summons to MacDonald. [2] The Election was a surprise and most forecasts were hopelessly out. The swing to Labour was anticipated in the North and the Tories were expected to lose very heavily in Scotland, while most people expected a Liberal revival to result in at least a party of 100 to 125.

Actually the industrial North went, as expected, almost wholly Labour but Greater London was a surprise, Labour winning far more seats than anyone expected. Labour also recorded more gains in the Midlands than anyone anticipated. On the other hand, Scotland showed only small changes, and the Liberal revival simply missed fire. The Liberals ran 511 candidates and spent over 750,000 and secured less than 60 seats. I have never believed in the Liberal revival, at least under Lloyd George. As Lincoln said: 'You can fool all the people some of the time, some of the people all the time, but you can't fool all the people all the time'. The rejection of Lloyd George's 'cure unemployment quick' schemes in spite of lavish advertisement, the support of Runciman [3], Simon [4] and Lord Grey [5] and the general support of Rothermere [6] and Beaverbrook [7], argues a certain 'horse sense' in the British people which is reassuring.

Baldwin made the opposite mistake. 'Safety First' is not the slogan to win the support of youth and it is not the way to British prosperity. Lazy thinking and self-complaisance were the besetting sins of the last administration. As I told Amery, Ormsby-Gore and Elliot [8] not once, but a dozen times in the last two years, the Tories were damned not by sins of commission but by sins of omission. My deep conviction of this emboldens me to suggest that it is important for the Commonwealth Government to bring forward definite practical measures to deal with some of Australia's problems and I have a little anxiety lest the careful sifting of problems by Committees may defer action too long. I shall illustrate what I mean when I come to the Dairy industry at a later stage in this letter.

The personnel of the new Government is not likely to be announced until after the mail closes. I am hoping that, in the offices which are vital to success on the economic side of the Imperial Conference, we may get men who will have an interest in Empire affairs and some ability and force of character. J. H. Thomas [9] has told both Cooper [10] and myself that Ramsay so desires to be Foreign Secretary that he will suggest Thomas as Prime Minister.

This I do not believe, for MacDonald's vanity is immense and I can hardly imagine his allowing anyone else to secure the leadership.

Thomas, however, is entitled to claim any office save that of Chancellor. Whether he will take Dominions and Colonies or not cannot yet be known. If he does not, then the position may go to Tom Johnston [11], although it would represent very rapid promotion, probably much too rapid. George Lansbury [12] has been tipped but that would be a joke. I sincerely fear the possibility of William Lunn [13], who is very third rate. At the Board of Trade I hope to see William Graham [14], but fear Alexander [15], a bigoted free trader.

Among the probable members of the Cabinet I should, from present knowledge, regard the following as useful from an Empire standpoint: Thomas, Clynes [16], Graham, Dalton [17], Johnston and Miss Bondfield [18], together with Lunn in a useless way.

The state of the Parties is now pretty clear. There are 6 results still to come. Oxford University 2 seats, Scottish Universities 3 seats and Rugby. Labour may win Rugby and the Liberals will hold one Scotch University seat. This will give Labour 289, Tories 259, Liberals 59 and Independents 8. of the 8 Independents, 3 will normally vote with Labour, I with the Liberals and 4 with the Tories; so that the nett result may be regarded as Labour 292, Tories 263, Liberals 60. Comparison with 1923 is illuminating. The Tories are at almost exactly the same strength but whereas in 1923 the Liberals held 159 seats, today 100 of these have gone to Labour.

I am amused to find among the people I have met, almost equal rejoicing over the elimination of Saklatvala [19], the Indian Communist for Battersea, and Sir Harry Brittain. [20] Further comment is needless. The more unfortunate results have been the elimination of quite a number of the useful younger brigade among the Tories. The crusted veterans of the Party intended to hold the safest seats and many of the young men who were shewing considerable promise held dangerous seats, which, in many cases, have been lost. Harold Macmillan [21], H. G. Williams [22], Duff Cooper [23], R. S. Hudson [24] and Cochrane [25] are noteworthy examples. Walter Elliot, Ormsby-Gore and Bob Boothby [26] have all been returned, as also has your friend Glyn. [27]

THE LABOUR GOVERNMENT AND THE IMPERIAL CONFERENCE

Naturally one cannot expect the new Government to form any ideas about the next Imperial Conference for at least a month but as soon as I know the personnel of the 4 offices-the Secretary of State for the Dominions and Colonies, the Under-Secretary for the Dominions, the Under-Secretary for the Colonies, and the President of the Board of Trade-I shall begin to take steps to impress on these people the importance of their recognising that the preparatory work for the Imperial Conference should be pushed ahead. I shall probably send you a cable in about a week's time suggesting that, after the Government has been in office for a fortnight or so, it would be wise for you to send a cable pointing out the immense importance which you attach to the economic side of the next Imperial Conference, telling them of your intention to study the problems as fully as possible and urging that it is to the manifest advantage of both Great Britain and Australia that the preparatory work for the Conference should be of such a nature as to guarantee important and useful discussions leading to the formation of sound plans for Empire development. I should probably also suggest that in such a cable you might mention the desirability of discussing at the Imperial Conference the attitude of British Empire Countries to the economic activities of the League of Nations and the I.L.O. I think that a suggestion of that sort, coming from you to the Labour Government, would increase their interest in your cable.

Having initially aroused the interest of the Labour Government in their task of meeting the Imperial Conference, I then think that, in two or three months' time, it will be wise to start suggestions that any reductions of preferences in the 1930 Budget, occurring as they would just before the Imperial Conference, would be a frightful mistake of tactics from the Labour Party's point of view and might damage them very severely in the country.

The other matter of outstanding importance will be the Empire Marketing Board. I do not think there is any doubt that the Labour Party will continue to support the Board but I shall do my utmost to try and get them to realise, in a clearer way than Churchill [28] made it possible in the case of the Conservatives, that the E. M. B. fund is really Imperial money and as having been placed irrevocably at the disposal of the whole Empire.

It is too early to form any impression whether the change of Government will involve any important changes in the E.M.B.

policy. The only thing that one can forecast is that the Labour Party will probably want the Board to undertake some important preliminary investigations into the possibility of bulk purchase schemes and to investigate more thoroughly such questions as the margins that exist as between the retail and wholesale prices in a number of commodities.

YOUR LETTER OF APRIL 30TH

I have already expressed my great appreciation for this letter and will now deal with some of the points which you raise.

I was extremely interested in what you were good enough to say about the political situation in Australia but, of course, can make no useful comments. [29]

Philip Snowden [30]

The first point, therefore, that arises in your letter is your remarks about Philip Snowden's article in 'John Bull' entitled 'Is the Empire bleeding Britain white'. [31] Now that he is in office again, this must be used as ammunition against him should he take any line which we strongly desire to check. I shall try and see that effective use is made of this extremely bad 'faux pas'.

American Competition

At more than one point in your letter you comment on the data that I have supplied on the subject of American competition. [32] The memorandum entitled 'The Growing Dependence of British Industry on Empire Markets', which I forwarded to you by last mail, [33] will have given you a good deal more information on this subject and has brought the figures up to date. There cannot be any doubt that you were right when you forecasted that, by the time the next Imperial Conference meets, the position of America in world trade will be about the biggest economic fact which we will have to consider. I expect that you have arranged with Herbert Brookes [34] to supply you with a good deal of information. I shall write to Brookes myself asking him to let me have anything that he finds of special interest.

Economic Mission

There has been a considerable amount of delay in setting up the Committee which Duckham [35] asked for in order to follow on and clear up the work of the Business Mission to Australia. The British Government's consent to the formation of the Committee and the appointment of a whole time Secretary was only received about ten days before the Election and Duckham has not been very well and has been taking a couple of weeks' holiday at his home.

The first meeting of the Committee has now been summoned for June 18th and after that I shall be in a position to judge what use the Committee is likely to prove.

I was, of course, extremely glad to find how satisfied you were with the work of the Mission. [36]

Intensive Development and Dairy Industry

This question is so important that I will deal with it at a later stage in this letter.

Governmental Economy

I was very glad to find that you agreed so heartily with the views that I had expressed in my letter of February 20th [37] about the futility of an economy policy to solve the problems which face countries such as Australia or Great Britain. In both countries, though in different degrees, a standard of living is maintained which is considerably above that of our main competitors. The result of the General Election seems to me a fairly clear indication that an economy policy cannot be made acceptable to the people. The sooner Great Britain and Australia realise that the only possible basis upon which a high standard of living can be maintained is high efficiency of production, the better it will be for both countries. The Australian dried fruit industry, for instance, cannot possibly hope to maintain itself in perpetuity with a wage of about 12/6d a day in face of wages of 2/- a day or lower in Smyrna, Greece and Spain, unless it can achieve a higher average yield per acre and a higher general efficiency of growth than its low wage paying competitors. Again, the Australian sugar industry ought to regard the closer approximation to the yield per acre achieved in Java as a necessary concomitant to the complete protection which the people of Australia afford to it; while the Australian dairy farmer ought to urge his leaders to use their brains in assisting him to double the yield per cow rather than to elaborate further refinement of schemes, such as the Paterson scheme. [38]

Report on the work of the I.E. C. and the E.M.B.

I am glad that you approve of the suggestion that I should prepare a report which, if it proved suitable, you would probably lay on the table of the House. I shall take the matter in hand at once but you will realise that this first report must necessarily deal with the work of both Bodies since their inception. It is possible that you may feel it desirable for me to prepare an annual report following on this first effort but that is a question that had better wait until you have seen the first report.

Rome and Geneva

I have already sent you quite a lot of information about this, as a result of the work of the Economic Consultative Committee, but the change of Government in this country now gives a greatly increased importance to the subject of British Empire cooperation with International Bodies. The Labour Party has consistently attacked the Conservatives for a lukewarm attitude towards the League of Nations and particularly the I.L.O.

I am extremely glad that you agree with me that the only line which we can afford to take is one of cooperation with these Bodies in order that we may exert a modifying influence upon their activities. [39] With a Labour Government in power here, this will become all the more necessary.

I suggest that a line of country which we might very effectively take is that the British Empire contributes about a quarter of the whole of the finances of the League of Nations and that, while the British Empire does not wish to check the activities undertaken at the request of foreign countries, yet we have a right to demand that, in return for our very large contribution, we should receive some direct return in the form of services along lines that we regard as desirable.

I feel rather strongly that, at the last Assembly of the League of Nations, the British Empire attitude on the League Budget was unfortunate. A series of criticisms on minor points were put forward which had the nett effect of suggesting an attitude of carping criticism. The alternative policy, it seemed to me, was to have made a frank declaration that there was no desire of any sort to reduce the Budget of the League but that we believed that, in some directions, and particularly through the I.L.O., a number of comparatively unimportant sideshows were absorbing considerable sums of money and that more effective work could be done by concentration upon matters of wider International interest. Among such types of activities one would, of course, include the provision of comparable information and statistics not only by the Economic Organization of the League but also on labour conditions throughout the world by the I.L.O.

Imperial Conference

I shall not burden this letter, which is already destined to be of great length, with replies to the issues that you raise on the Imperial Conference but will deal with these questions in a separate letter.

HOFMEYR [40]

I am now able to enclose a report of the speech made by Hofmeyr, about which I wrote to you in my letter of the 24th May. I hope that you will find time to read it.

INTENSIVE DEVELOPMENT IN THE DAIRY INDUSTRY

The part of your letter which perhaps interested me most was where you dealt with what the Commonwealth Government is proposing in regard to the dairy industry. It is always a great pleasure to me when I find that, in making a proposal to you, I have simply been thinking along the same lines that you have been meditating upon yourself because this is a demonstration that I am able to keep fairly well in touch with you. Incidentally I find that, in my correspondence with Rivett [41],time after time both he and I arrive at the same conclusions, more or less simultaneously, and our letters expressing these similar [ideas] on the same problem cross one another at sea. There can be no possible doubt that the steps that you have already taken are very sound but the point that I should like strongly to urge is as follows:

You have set up a Committee under Richardson [42] to investigate how to accelerate the efficiency of the dairy industry. The conclusions which Richardson's Committee will reach will doubtless be quite numerous and varied but I suggest that if, by the time this letter reaches you, you have not received an interim report from Richardson, you should ask him whether his Committee cannot definitely state that there are certain things which stand out as being immediately both desirable and practicable.

I am just a little afraid lest the Committee should spend too much time on investigation before presenting a first report. I am perfectly certain that John Orr [43] would say that there are certain plain and simple things which can be immediately achieved without any further enquiry.

In your letter you mention herd testing, improvement of herds, the better standard of bull and more inspectors to advise and assist the producer. You do not, however, mention what I am sure Orr would regard as the first essential, namely better feeding. Now better feeding falls under two heads: quantity of food and quality of food. Quantity of food does present a good number of problems which I have no doubt Richardson's Committee will fully investigate. These problems include improving the pastures themselves, methods of conserving fodder, provision against drought through such schemes as the highly transportable grasscake and many other matters, but when one comes to the quality of feeding, which I believe Orr would maintain to be of very firstclass importance, there does not seem to be any reason why an immediate recommendation should not be made.

Orr and Theiler [44] both satisfied themselves that in most districts in Australia, and certainly including most of the dairying districts, there existed serious mineral deficiencies profoundly affecting the health of the cattle and consequently the yield of the cows. I think I told you in an earlier letter that Orr said that on the south coast of N. S.W. he saw cattle standing knee deep in Paspalum but that these unfortunate animals were unable to make satisfactory use of the masses of food that were available because that food was deficient in phosphate. I therefore cannot help believing that it would be possible for your Committee to make an immediate recommendation that steps should be taken to facilitate the supply of satisfactory salt licks to dairy farmers and also to assist dairy farmers to understand the importance of the top dressing of pastures. To carry this into effect it would be necessary to have an arrangement whereby (a) the pastures of the various dairying districts were analysed to show their mineral contents and thus to indicate what deficiencies ought to be made good by salt licks or by top dressing. In most cases the supply of some form of phosphate, such as bone meal, direct to the cattle would make a very great difference but there may be districts in which it would be necessary to add to the salt lick small quantities of potassium, iodine, or even of iron or possibly manganese. In certain other districts the main deficiency may be calcium but an analysis of the pastures would immediately show what was lacking.

(b) Having obtained for each dairying district a sound appreciation of the mineral deficiencies affecting the efficiency of the cattle, the next step would be to see that farmers understood the importance of sound feeding. On one simple subject like this, it would seem to me that a letter addressed to the farmers of each district by a Central National Committee would arouse their attention and interest. In addition I should have thought that a series of broadcast talks could have been arranged and lectures given in the districts by specially qualified men.

(c) Having first shewn the minerals that are necessary and, secondly, taken steps to arouse the interest of farmers in the matter, the next step would be to see that the farmers could obtain suitable salt licks as cheaply as possible. Orr told me on his return from Australia that quite a number of Mushroom Companies had sprung up to supply salt licks to farmers and that these salt licks had no necessary relation to the actual mineral deficiencies in the districts in which they were sold and that, in addition, prices of up to 20 per ton were being charged for salt licks, the ingredients of which did not cost the producing company more than about 6. Orr's solution was to get the various big Pastoral Companies in association perhaps with one or more of the Fertilizer Companies to create a small subsidiary Company for the provision of salt licks according to the recognised deficiency of the various districts in question at a price which would yield the subsidiary Company a profit not to exceed say 10%.

Possibly I am underestimating the difficulties of making rapid progress but I should have imagined that an immediate recommendation along these lines might have been made and put into action with quite a small expenditure of money and without the creation of a large number of inspectors.

I have gone into this matter at some length and touched on a number of details in which you may not be interested and I quite anticipate that you will not yourself want to bring forward technical matters connected with phosphates, iodine, calcium, etc.

I have, however, elaborated this in order to make points that I do feel to be extremely important, and the point is this, that while I emphatically agree with the desirability of the Commonwealth Government obtaining the very best expert advice before it commits itself to action, yet at the same time there are economic and political dangers in undue delay in putting forward solutions for Australia's very pressing problems.

As I see it nothing is more urgent for Australia than to achieve a greater efficiency of production in some of the industries that will lead to export. I would, therefore, very tentatively suggest, for your consideration, that when you ask a Committee or the D. &

M. Commission to investigate a problem and to report, you might consider asking them to take their investigation in two or three stages and that if, after a preliminary survey of the situation, they are able unanimously to state that there are one or more outstanding things which, if adopted, would immediately have an important effect, then the Committee should present an urgent preliminary report recommending action along such lines.

In regard to the dairying business, I shall, without any reference to your letter or to this communication, write to Richardson about the feeding side. He will regard this as perfectly natural because he knows how intensely interested I am in that problem. I should also inform you that I have received a cable from Gepp [45] asking me to obtain a good deal of information from British sources which I assume is for the purpose of this investigation.

Beef

There is one other question that you raise in your letter and on which you have been good enough to ask me to express my view, that is on the assumption that the dairying investigations, to which you have already appointed a Committee, prove a success, as to what industry to take up next. You suggest the beef industry and I quite agree that that would be very desirable. At the same time I should regard the beef industry as being a little more long range than the dairy industry because the success with the beef industry must involve first better feeding, secondly better breeding and thirdly improved refrigeration conditions.

Mutton & Lamb

While I should strongly support the Commonwealth Government in taking up the question of the beef industry, I would suggest that, simultaneously, steps should be taken to stimulate a greater efficiency in production of mutton and lamb and, perhaps, also of pig products.

New Zealand has retained the premier position in the supply of mutton and lamb to this country and it is probable that, as compared with Australia as a whole, New Zealand is in a position of considerable climatic advantage over Australia for the production of mutton and lamb. When, however, one considers certain favoured districts in Australia, such as Tasmania, portions of Southern Victoria, the Adelaide Hills and the south- east of South Australia and probably portions of the south of New South Wales, one cannot avoid believing that Australia possesses any amount of territory in which she could effectively compete with New Zealand in mutton and lamb production. I am, of course, aware of the serious effect which caseous lymphadenitis is having on Australian mutton and lamb exports but this is a temporary handicap which must be overcome. I should have thought that among the ways in which Australia can rapidly expand her economically profitable exports, the development of a sound trade in mutton and lamb was one of the clearest examples.

Pig Products

I will not largely add to the length of this letter by any detailed comment on pig products but will just remind you that the Imperial Economic Committee will be issuing a report on Pig Products in the course of the next two or three months. I believe that this report will be a really valuable document and will just tentatively suggest that the receipt of this report by the Commonwealth Government might be made to synchronise with a move, through the Australian Pig Industry Council, for the stimulation of productive efficiency in regard to pork, bacon and hams.

Yours sincerely, F. L. MCDOUGALL

1 The thirty-seven-page letter is on file AA:M111, 1929.

2 At the dissolution of the House of Commons before the General Election of 30 May, the Conservative Party, led by Stanley Baldwin, held 396 seats; Labour, led by Ramsay MacDonald, 160; the Liberal Party, led by David Lloyd George, 46. After the election the figures were Labour 288, Conservative 260, Liberal 59.

MacDonald formed a Labour minority government.

3 Walter Runciman, shipowner; Liberal Minister 1907-16.

4 Sir John Simon, Liberal M.P.; Attorney-General 1913-15; Home Secretary 1915-16.

5 Foreign Secretary 1905-16.

6 Lord Rothermere, Chief Proprietor of the Daily Mail, the Daily Mirror and the London Evening News, 7 Lord Beaverbrook, Chief Proprietor of the Daily Express, the Sunday Express and the Evening Standard.

8 Leopold Amery, Secretary for the Colonies and for Dominion Affairs; William Ormsby-Gore, Parliamentary Under-Secretary for the Colonies; Walter Elliot, Parliamentary Under-Secretary for Scotland in Baldwin's Government.

9 Colonial Secretary 1924; Lord Privy Seal in the 1929 Labour Government.

10 Sir James Cooper, company director; Chairman of the London Agencies of the Dried Fruits, Canned Fruits and Dairy Produce Control Boards.

11 Editor of Forward, a Glasgow labour paper; appointed Parliamentary Under-Secretary for Scotland.

12 Radical publicist; appointed First Commissioner of Works.

13 Parliamentary Secretary to the Department of Overseas Trade 1924; Parliamentary Under-Secretary for the Colonies 1929.

14 Financial Secretary to the Treasury 1924; President of the Board of Trade 1920.

15 A. V. Alexander, Parliamentary Secretary to the Board of Trade 1924; appointed First Lord of the Admiralty 1929.

16 J. R. Clynes, Lord Privy Seal 1924; Home Secretary 1929.

17 Hugh Dalton, economist; appointed Parliamentary Under-Secretary at the Foreign Office.

18 Margaret Bondfield, Parliamentary Secretary to the Ministry of Labour 1924; Minister of Labour 1929.

19 Shapurji Saklatvala, Communist M.P. for North Battersea 1922- 23, 1924-20.

20 Conservative M.P. 1918-29; a founder of the Tariff Reform League and the Anti-Socialist Union.

21 Prime Minister 1957-63 22 H. G. Williams, Parliamentary Secretary at the Board of Trade 1928-29.

23 A. Duff Cooper, Financial Secretary at the War Office 1928-29;

junior Minister 1931-35; Secretary for War 1935-37; First Lord of the Admiralty 1937-38; Minister of Information 1940-41; Chancellor of the Duchy of Lancaster 1941-43.

24 Diplomat; junior Minister 1931-35, 1936-40; Minister of Pensions 1935-36; Minister of Shipping 1940; Minister of Agriculture and Fisheries 1940-45.

25 A. D. Cochrane, retired naval officer; Governor of Burma 1936- 41.

26 R. J. G. Boothby, Parliamentary Private Secretary to the Chancellor of the Exchequer 1926-29.

27 R. G. C. Glyn.

28 Winston Churchill, Chancellor of the Exchequer 1924-29 29 See note 1 to Letter 211.

30 Chancellor of the Exchequer in the Labour Governments of 1924 and 1929.

31 See Letter 211. Bruce had read the article 'with some surprise and a considerable measure of annoyance .

32 See note 5 to Letter 211.

33 See Letter 234 and note 14 to Letter 232.

34 Victorian manufacturer and pastoralist; Australian Commissioner-General in New York 1929-30.

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

36 See note 1 to Letter 212.

37 Letter 212.

38 A levy on production to finance a bounty on exported butter;

the cost of the levy was recovered from higher prices on butter consumed in Australia. The scheme was introduced in 1926 by Thomas Paterson, Minister for Markets and Migration.

39 See note 11 to Letter 215 40 Jan Hofmeyr, South African scholar, administrator and politician. See Letter 233.

41 David Rivett, Deputy Chairman and Chief Executive Officer of the Commonwealth Council for Scientific and Industrial Research.

42 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.

43 Director of the Rowett Institute for Research in Animal Nutrition, Aberdeen.

44 Sir Arnold Theiler, Director of Veterinary Education and Research in South Africa until his retirement in 1927.

45 H. W. Gepp, Chairman of the Commonwealth Development and Migration Commission. The Richardson Committee was to direct research to be carried out by the Commission.