74

27th May, 1926

PERSONAL & CONFIDENTIAL

Dear Mr. Bruce,

IMPERIAL CONFERENCE

Owing to the upheaval caused by the General Strike and to the subsequent difficulties over the coal mining stoppage [1], it has been impossible to make much progress in the endeavour to arouse great interest in the coming Imperial Conference.

As soon as Parliament reassembles, I shall try to get a number of members to agree to devote a considerable amount of time and thought to the work of educating public opinion as to the importance of the economic side of the Conference being made a success.

Peterson [2] of the 'Times' tells me that he believes Mr.

Mackenzie King [3] has for some time been in personal communication with General Hertzog [4] and with Mr. Cosgrave [5] and he anticipates a formidable non-co-operation 'bloc' at the Conference in consequence. If there is any truth in this suggestion, I presume it would chiefly affect the political and foreign relations side of the Conference. This would render all the more necessary and desirable a successful economic side.

The difficulty about Empire economics is to induce people here to realise that Empire Development is a burning question. Almost everyone will agree that a policy of Empire development is necessary but very few indeed seem to appreciate the fact that time is important and that progress should be made at once.

However I feel sure that, in October, the country will be more interested in Empire economics than it was three years ago.

If you feel inclined to read the original of the article which I wrote for the Times' 'Empire Day' Number and which I am enclosing in my other letter [6], you will see my reasons for believing that this country is now far riper for serious consideration of the problems of Empire economics than it was in 1923.

Although naturally no one realised it at the time, 1923 can be regarded as the first typical post war year so far as British trade is concerned.

In 1923 the leaders of commercial enterprise were looking for a return to pre-war conditions; the trade returns for 1924, 1925 and the first half of 1926 show that they were wrong and that when you preached the necessity to Great Britain of Empire development, you were entirely on right lines.

For the purpose of developing markets for British goods, the expansion of population in Australia and New Zealand is more important than any where else in the Dominions. Not only are Australia and New Zealand the biggest per capita purchasers of British goods, they are also the two countries in which development could most rapidly take place. The difficulty of rapid progress is psychological rather than economic, that is to say it is not the economic factor but the factor of confidence which is needed before any great forward step can be taken. In effect at the present time Great Britain is saying to Australia and New Zealand'Take our surplus population, develop your resources, double your people in a short space of time and increase your own strength and the strength of Great Britain and the whole Empire.'- Australia and New Zealand make two forms of answer.

Officially the answer is-'Yes we realise all that but what about markets for our exports of primary produce?' Unofficially Australia and New Zealand say-'Why should we speed up our development? We are going ahead, look at our record; we are taking some of your people but you send us some curious material. If we speed up our reception of migrants and our general development, can we maintain our standard of living? Your financial pundits are continuously warning us against over borrowing apparently not realising that we cannot develop without money'.

I suggest that the above does in a way summarise the situation as between Great Britain and Australia and New Zealand.

If it should prove possible to arouse deep interest in the Conference during the next three months, it may also be possible that the British Government will give the problems of Empire development greater consideration before the Conference.

I imagine that a most useful purpose would be served if Mr.

Baldwin [7] clearly stated the position of British industry and showed the paramount need for markets for British goods; if he emphasized Great Britain's dependence upon the Overseas Empire for the future years and pointed out the Empire's dependence upon Great Britain for markets for produce. for defence, and for finance.

I should like to see Mr. Baldwin thus appeal to the Dominions for a policy of accelerated development but to support his appeal with a clear statement that showed that he realised the difficulties in the way and that he invited the Dominions to accept the full co- operation of Great Britain in developmental problems.

Great Britain might thus say to the Dominions but especially to Australia and New Zealand-'If you will consent to a policy of accelerated development we, on our part, will undertake to underwrite a large share of any risk which the adoption of such a policy may involve. We will share the financial risk and we will guarantee to take whatever action may ultimately become necessary to give you a better position than foreign countries in our markets for your primary produce. Today we are putting into effect the Imperial Economic Committee's recommendations for a system of voluntary preference. That may be a success. If, in two years, it is not having marked effect, we will undertake to put into effect other methods to achieve this objective; and we guarantee to use the next two years to educate the country to realise what Empire development means'.

If the Imperial Conference approaches economic problems in a businesslike way, it is obvious that it would be most useful if Australia was prepared with a number of concrete schemes, in which British co-operation could be usefully applied. For instance:

1. Unification of the railway gauges.

2. Feeder railways to the Main Lines.

3. North-South line and Territory railway development.

4. Development of large schemes for the utilization of the Murray country, the fattening of stock, fodder reserve etc.

5. Development of coastal areas by soil improvement to allow of intensive settlement.

These are a few of the many possible large schemes which could be prepared in advance with the idea of some definite form of British co-operation.

I understand from Mr. Oscar Thompson, of the Aberdeen White Star Line and of the Overseas Settlement Committee, that Mr.

Christopher Turnor [8] is anxious to secure you at his country place for your first week-end in England and to invite Mr. Amery [9] and half a dozen other people who matter to meet you to discuss, before the formal conference starts, the problems of Empire Trade and Empire Migration. Mr. Thompson has asked Mr. John Sanderson [10] to communicate with you about this. If you are able to accept this invitation, a discussion of practicable schemes would be of very great use and interest.

As I see it, the big questions that must be faced, so far as Australia and New Zealand are concerned, are two:

1 (a) To what extent can Great Britain give pledges to underwrite, at least in part, the financial and marketing risks of accelerated development in Australia and New Zealand.

1 (b) How far, in the light of recent history, will these pledges inspire confidence overseas? 2 How far can the Governments of Australia and New Zealand induce their people to agree to a policy of accelerated development?

CROWN COLONIES

Apart from Australia and New Zealand, the recent history of West and East African Development is probably the most pleasing record of progress within the Empire. The importance of this development to Great Britain can readily be seen by reference to the following figures extracted from the last Board of Trade journal:

Percentage of British Produce and manufactures taken by various countries

1913 Year ending Year ending March 1925 March 1926 Australia and New Zealand 8.5% 10.9% 11.7% West Africa 1.2% 1.5% 2.0% East Africa .5% .8% 1 1.0%

The latest trade returns also show how the African Crown Colonies are increasing as markets for British goods. These returns cover the first quarter of 1924, 1925 and 1926.

Exports of British Produce and manufactures for quarter ending March 31st

1924 1925 1926 West Africa 2,099,000 3,275,000 3,718,000 East Africa 732,000 1,272,000 1,442,000

You will realise how striking a story of progress these figures show. I am hoping that one result of the Imperial Conference will be that the Dominions will commence to take an active interest in the progress and development of the Crown Colonies.

Yours sincerely, F. L. MCDOUGALL

1 See Letter 69.

2 F. G. R. S. Peterson, Dominions Editor of the Times.

3 W. L. Mackenzie King, Canadian Prime Minister.

4 General J. B. M. Hertzog, South African Prime Minister.

5 W. T. Cosgrave, President of the Executive Council of the Irish Free State Government.

6 See Letter 72.

7 Stanley Baldwin, Prime Minister.

8 Christopher Hatton Turner, author of articles and pamphlets on the subjects of land and education.

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

10 Director of the Australian Agricultural Company, the Bank of Australasia and the Australian Mercantile Land and Finance Company.