40 McDougall to Bruce

Letter WASHINGTON, 6 September 1942

In this letter I shall both report progress and attempt to give you an account of some aspects of the Washington attitude in so far as I have been able to ascertain it.

On the morning of September 2nd I had 1 1/2 hours with Mr. Wallace in the Senate Office Building. He read my revised memorandum [1] very carefully, [and] said that he was in complete agreement with it. He determined to give it to the President whom he was seeing at 1 p.m. I also showed Mr. Wallace the enclosed diagram. [2] He was very interested, had copies made in his office, but suggested that while he thought the memorandum should be circulated to a number of people the diagram should be kept in reserve.

He then talked about you. He expressed his own view that there would be advantages in avoiding either an American or an English central figure for the Economic Council of the United Nations and suggested that you had the experience and qualities needed for the position.

He then told me with a good deal of amusement that he had at dinner at Harold Butler's the night before pumped the importance of what he called the Bruce-McDougall approach into Richard Law. I did not get any light on Law's reactions. Mr. Wallace, rather ill- advisedly, mentioned to Law the possible political security aspects of his own 'ever-normal granary' idea. I had lightly touched on this subject in conversation with Mr. Wallace. I suggested that it would be as well to keep this idea well in the background at the present stage.

It is by no means easy in the present rushed and rather confused Washington to see the people one wants without some considerable delays. I saw Berle again on September 3rd and have an appointment for a more serious talk tomorrow. I had a long discussion with Hansen [3] who is in the fullest agreement and we were able to bring Riefler [4] into our talk towards its conclusion. I have not yet heard again from Sumner Welles.

On Friday afternoon I did the job asked for by Mrs. Roosevelt in taking charge of a round-table discussion about Food and Agriculture at the International Students' Assembly. There I met our nice Dutch friend Van der Plas [5] who has been held up in Washington but hopes to go to Australia by the end of this month.

We lunched together yesterday. Van der Plas stressed the need for United Nations action if criticism of American imperialism is to be avoided.

Yesterday (Saturday) afternoon I had 1 1/2 hours with Sir Owen Dixon. He had read the memorandum, said he agreed but seemed more

concerned to discuss what he describes as the failure of Australian democracy than any other subject. However, coming at our subjects from that angle he advocated International Monetary and Economic Authorities to prevent democratic Governments making use of ill-considered plans for depreciating the currency or utilizing extreme forms of protectionism.

I have not seen more of the Office of War Information (O.W.I.) heads yet but expect to see Sherwood, in charge of Foreign Services, and MacLeish, Home Services, this week and probably also Elmer Davis who is Director.

My feeling is that a good deal of progress has been made, the Vice President is completely our ally, but it will probably take several more weeks before one can get to the stage of knowing whether the U.S. Administration, which in effect means the President, is prepared to take a definite line about getting ahead with the joint consideration of Food and Agriculture or other relatively non-controversial issues such as the Development of Backward Areas.

Berle tells me that the U.K. Embassy has now made available to the State Department and the U.S. Treasury a summary of the papers prepared by the U.K. Treasury group working with Keynes. My impression is that the plans for an International Bank worked out by the State Department Committee is not markedly different from Keynes' international Clearing Union.

Hansen feels, and I strongly agree with him, that we ought not to make a financial institution the centre of the post-war economic set up. To do so would be once again to exaggerate the importance of the monetary factor rather than to regard it as an essential mechanism to secure the production and exchange of goods. The Cordell Hull-Pasvolsky approach tends to give a similar exaggerated importance to commercial policy.

What Hansen and I feel is that we need to have an Economic Authority with a series of specialized organizations working under its general supervision.

These would include inter alia-an international Bank to regulate balances of payment and to finance development, a Development Authority, an Agricultural Office, a Nutrition Office, an Office for the co-ordination of National Public Works, a Commodity Control Central Authority, a Central Committee on Commercial Policy and an Economic Intelligence Service.

There is a tendency here to desire to work out American solutions of world problems and to expect other countries to accept these without much demur. A good number of highly placed people however see that such a course involves the danger of the schemes being regarded either as American interference or even American imperialism.

There can be no doubt that, although the official American attitude towards the Indian problem is most correct, there is a very widespread sympathy with the demand for Indian independence.

I suppose full thought has been given to the possibility of the U.K. Government being prepared to agree that the U.S.A. or the United Nations should be associated with the U.K. in guaranteeing the Cripps proposals. [6] It might be worth while considering a U.S. Commission to assist the U.K. and the Indian leaders to determine at what date after the war the Cripps proposals should be put into effect. There is much distrust in this country of the English governing classes, an exaggerated and ill informed distrust but nevertheless a very real one. There is much need therefore for the U.K. to adopt the most generous possible attitude.

Riefler is returning to London in a few days' time with, I think, the rank of Minister and full charge of a much enlarged Economic Warfare staff. He would like to be given an additional mission connected with post-war reconstruction. I hope you will see him very soon after he returns.

Have you given any thought to seeing General Eisenhower? [7]

The enclosed diagram shows a possible development from United Nations agencies to a World Authority. Please look first at the key at the bottom left hand corner. If we could achieve something like the suggested programme for 1942 within the next three months, we should place ourselves in a strong position for political warfare in the coming winter.

As regards my own movements, I feel I should try to get a clear understanding as to whether the Administration will decide to go ahead on our lines or will consider that the time is not ripe. I expect this may take another three or four weeks. So far I have heard nothing from you. I should like to know your views about whether I should send any report or memorandum to the Department of External Affairs from here or whether this should be done from London. [8] Brigden ought to have made many contacts here and to have been able to give a fairly clear account to Australia but unfortunately he seems to avoid contacts and only concerns himself with reciprocal lease-lend questions. He has not for instance seen Hansen or Riefler.

One other question is that my Dried Fruit Board cabled me to go into the future problems of dried fruits but added words about the extreme importance of Imperial Preference and especially the Canadian preference. I feel that it might be useful to go west to meet the Californian Dried Fruit people on a quite informal basis.

Have you any views on this point?

September 7th

I had a most interesting talk with Berle today. I called on him at 12:30 at the State Department and our conversation lasted until 2:15. He showed me, in confidence, a number of papers prepared in the State Department; we then discussed the time factor in relation to a United Nations approach to reconstruction. Berle said he was in agreement with the general lines of my memorandum.

He thought we ought to be prepared to launch a psychological offensive whenever the President and Prime Minister thought this desirable. He expected that the winter of 1942/43 would prove to be the right moment.

Berle's attitude did not alter my conception of the proper line of approach except in two instances. He emphasized the U.S. political difficulties of which the principal factor is that a large proportion of the population will tend to look at relief and reconstruction and to ask who is going to pay for the doings.

These people are likely to answer that the burden will fall on the U.S.A. For this reason he attaches more weight than I have given to the International Bank.

His argument was along these lines. The way to put the issue to the American public is to put American employment and standards of living in the forefront; make them understand that the use of the U.S. gold reserves to secure world economic activity will be reflected in increased demands for U.S.A. goods and hence in more employment in factory and farm.

He therefore thinks that an International Bank, which is only one factor in the international organization, should be given first class priority in the United Nations' scheme for the post-war world.

His conception of the Bank is along the following lines. An International Bank of Issue, deriving its original capital, say some $1,000,000,000 to $2,000,000,000, mainly from U.S.A. The power of issue would increase its actual lending powers by from five to seven fold.

'The argument, to the American public, to be that in order to secure American prosperity the U.S. industries especially equipped for foreign trade must have overseas markets. The Bank is to make finance available for two major purposes: (1) to prevent short- term fluctuation depriving countries of purchasing power (2) to enable development schemes to be carried out.

Berle agrees that the Bank should not be the centre of the post- war economic set up but maintains that if we are to get popular U.S. backing for the general programme the Bank should have early priority in any enunciation of policy.

Following our talk about the Bank, we discussed the need for early action on a United Nations basis if political warfare is to be effective.

Berle wholly agreed with my view that a United Nations approach was essential. He further agreed with the idea of classifying problems into two categories, namely those on which a United Nations method was desirable at once and those about which prior Anglo-American understanding was necessary.

His choice of subjects for technical commissions set up on behalf of the United Nations would be:-

1. To consider the establishment of an International Bank.

2. To propose plans for international action in regard to health.

3. To consider Raw Materials problems.

4. Food and Agriculture.

In regard to the last Berle said he did not clearly understand the position and Appleby had been asked to produce a document. This had hung fire and Berle suggested that I should collaborate with Appleby in getting the position clear.

Berle thought that the President's appraisal of the U.S. political situation would determine whether early action should be taken.

Berle thought 80% of the U.S. public would at this stage support international action for political security and about 55% to 60% action for such economic collaboration as could be clearly put before the public.

We agreed that the present issue was not whether early publicity should be given to United Nations plans but whether immediate action should be taken to prepare the plans.

Berle suggested that I should see Mr. Cordell Hull since my association with the Vice President made my approach to the Administration rather lopsided.

Berle felt sure of Mr. Sumner Welles' support but said that Welles was away having a holiday at Bar Harbour. Berle thought that he might himself have the opportunity of discussing these issues with the President.

F. L. MCDOUGALL

1 The memorandum is published as an attachment to Document 42. For earlier drafts see file AA:M104, 10.

2 On the file cited in note 1. It set out a possible organisational structure for a world authority.

3 Professor of Political Economy, Harvard University, and economic adviser to the U.S. Govt.

4 See Document 29, note 3.

5 Van der Plas had been Governor of East Java and was going to Australia to serve as Netherlands East Indies Chief Commissioner.

6 For details of Sir Stafford Cripps's mission to India in March 1942 see file AA:A1608, G41/1/7, i and Nicholas Mansergh (ed.), The Transfer of Power 1942-7, vol. I, HMSO, London, 1970.

7 See Document 29, note 6.

8 Bruce cabled to McDougall on 16 September:

'I suggest you wait your return to London before sending any report or memoranda to Canberra.

It is Brigden's job to keep them informed of new developments and our picture should I think wait on the informal London talks.' See cablegram 83 on file AA:M100, September 1942.

[AA:M104, 10]