124

6th September, 1927

PERSONAL & CONFIDENTIAL

My dear Prime Minister,

By this mail I received a short letter from you dated the 27th July, in which you referred to the very strenuous tour of the various States that you were in the middle of making and also to the work of the Imperial Economic Committee. [1]

I was rather amused to find that the only communication sent to you by last mail was a three line memorandum covering a copy of the Fish Report of the Imperial Economic Committee. [2] I believe this is the first time during the whole period since I returned in 1924 that any mail has left with so brief a communication addressed to yourself from me. It seems to indicate two things;

firstly your patience in reading the stuff I send out and, secondly, to the fact that I am not addicted to many holidays.

VISIT TO SCOTCH RESEARCH STATIONS

Last week I was away in Scotland, having arranged with Julius [3] that we should jointly visit the Rowett Research Institute at Aberdeen, of which Dr. J. B. Orr is the Director.

Orr is a very remarkable man of about 45 years of age. Before he became Director of an Agricultural Research Station, he had achieved very considerable reputation on human nutrition. So much was this the case that during the last year of the War, he was brought back from France, where he was serving as M.O. to a Battalion, to investigate, on behalf of the War Office, the comparative nutritional needs of the civilian and military populations. Orr's war record was also remarkable as, simply serving as a Medical Officer, he received both the D.S.O. and the M.C. and this, as far as I am aware, without having any influence of any sort.

Julius, who naturally knows little about agriculture, was immensely impressed by the work being carried out at Aberdeen and this visit confirmed him in the idea of the importance that would attach to a visit by Orr to Australia.

I remained at Aberdeen for a further day with Dr. Orr after Julius had left and curiously enough Lord Lovat [4] arrived to see the work of the Institute. I was able to have a long talk with Lord Lovat about various points, to one of which I will refer in a later stage of this letter.

After visiting Aberdeen, I went to Edinburgh and inspected the Animal Breeding Research Station. I was fortunate in meeting Major Walter Elliot [5] at Edinburgh and we spent an entire afternoon discussing the research work of the Empire Marketing Board and also some rather interesting political questions.

MAJOR ELLIOT AND GOVERNMENT POLICY

Major Elliot has been up to the present time a Conservative Free Trader and when I was having this long talk with him, we were joined by R. G. Boothby [6] M.P., another Scotch Conservative Free Trader. The conversation turned upon the present Government's lack of any constructive industrial policy. Both Elliot and Boothby strongly agreed with my general contention that while the Government had been guilty of very few sins of commission, their sins of omission were grievous and, had there been any really effective opposition, the credit of the Government in the country could have been greatly damaged in debate.

I was extremely interested to find that both Elliot and Boothby were beginning to realise that a purely free trade policy would not meet the requirements of the present time. We discussed the importance of Empire agriculture to industrial Britain and they both agreed that a definite policy for the encouragement of agriculture both at home, in the Dominions and in the Colonies, was one which would, in the long run, probably benefit the secondary industries of Great Britain to a greater extent than any other single policy that could be adopted. They also felt that this was a policy which the Conservative Party ought to adopt.

I promised Elliot to draw up a private memorandum on the discussion which occurred on that occasion and I shall, of course, send you a copy.

I commented on the apparent constructive sterility of Mr. Baldwin.

[7] Elliot's comment on this remark was very interesting. He said that there was no possible doubt that Baldwin was an unrepentant protectionist, quite convinced that the real solution of Great Britain's industrial problems was along the line of safeguarding of industry and the development of Empire trade by means of tariffs and preference. As a result of the great disaster of 1923 [8], Baldwin felt that he was unable to advocate his own solutions until the party had come more into line with his own way of thinking. Under these circumstances he simply adopted certain catch words, such as 'peace in industry' and other phrases, in order to hold the fort while events themselves forced the realisation of the necessity of his way of thinking upon the remainder of the party.

I am inclined to think that this conversation in Edinburgh will have some influence on affairs when Parliament reassembles in November.

I need not bother you with any reference to the discussion between Elliot and myself on Empire Marketing Board problems but I am enclosing a special article from the 'Times' on the 'Chemistry of Grass' which was contributed by Walter Elliot. [9]

SIR GEORGE PEARCE'S [10] NEWCASTLE SPEECH

In my letter of the 16th August I commented on Sir George Pearce's speech at Newcastle and the very excellent reception that he had in the British press. On the 26th August the 'Times' published a leading article entitled 'Empire Consciousness' using Sir George Pearce's speech as their motive. [11] I am enclosing a copy of this article herewith.

On the 29th August Sir Harold Bowden, the Chairman of the Raleigh Cycle Co. Ltd., in commenting on this leader attacked the Australian tariff and I wrote a reply. I enclose copies of both Bowden's letter and my reply. [12]

There can be no doubt that no utterances on Empire economic questions have received so much publicity as Sir George Pearce's Newcastle speech since you left England last December.

IMPORTATION OF ALSATIANS

While in Scotland Julius and I were discussing the possible effect in Australia of the importation of Alsatian wolfhounds. In this country there are constant series of unpleasant episodes connected with this particular breed of dog, sheep worrying being one of the sins most commonly attributed to the breed. We both felt that if a considerable number of alsatians were imported into Australia, there is strong probability that a number of these dogs may take to the bush, join the dingos and the result of the introduction of alsatian blood into the Australian dingo is one which anyone who has the interests of Australia at heart must contemplate with horror.

Julius and I both feel that consideration should be given to an order prohibiting the importation of alsatians and, although this is a matter on which I feel I should not worry you, I am not at all sure to whom such a suggestion should be addressed. If you think the matter of sufficient importance, perhaps you would discuss it with the appropriate Minister.

7th September

LORD LOVAT AND THE BUSINESS DELEGATION

While at Aberdeen I had an opportunity of discussing with Lord Lovat the Business Delegation. He assured me that immediately he returned to London in October and when the holiday season was over, he was going to throw the whole of his weight to try and secure a really effective team for Australia. He by no means despaired of getting Lord Weir [13] to head the delegation and he thought that if Weir and Beckett [14] could be induced to go, the team would be sufficiently strong to be of real utility.

I have already told you that, in my opinion, Lovat will be able to exercise a stronger influence on the right type of man than even Mr. Amery. [15]

MR. J. M. KEYNES [16] AND THE LANCASHIRE COTTON TRADE

I enclose from today's 'Manchester Guardian' a report of J. M.

Keynes' speech to the Lancashire cotton trade. It is distinctly interesting in itself but it seems to me that the depression in Lancashire, which is so obviously borne out in his address, is a factor which Australia should take into more serious consideration before using her tariff for the establishment of cotton spinning.

It is unnecessary for me to labour this point but I think you may find the Keynes address rather useful in any discussion that may come up on this subject.

EMPIRE MARKETING BOARD AND ENTOMOLOGY

I am enclosing an interesting article from the 'Times Trade Supplement' on the 'Insect pests of the Empire' which is an account of the 'Parasite Zoo' which the Imperial Bureau of Entomology has established by means of a grant from the Empire Marketing Board. I think this is well worth your attention as you may find it useful as an indication of the way in which the application of science can help agricultural industries.

BRITISH TRADE

Last night I had to speak in the City at what is known as the '1912 Club'. I enclose the 'Times' report of the meeting. [17] In order to satisfy myself as regards the present position of British trade, I made a survey of the way in which British industrial rivals have been increasing their exports. This is really bringing the point made by you in your speech to the Imperial Conference in 1926 up to date. You then used the comparison between 1923 and 1925, I took out the figures of the increase in total exports of 1926 over 1923 and also for the first three months of 1927 over the first three months of 1923. The results were extremely interesting. I set them out below:

Netherlands

% Increase of 1926 over 1923 (whole year) 29.6 " " 1927 " 1923 (first 3 mths) 43.6

Belgium

% Increase of 1926 over 1923 (whole year) 14.4 " " 1927 " 1924 (first 3 mths) 11.2

France

1926 showed a reduction of 3% under 1923, doubtless due to the revaluation of the franc but the 3 months of 1927 showed an increase of 27.3% for the same period in 1923, indicating that the temporary dislocation of French industry, which was evident in 1926, had been overcome.

Czecho-Slovakia

% Increase of 1926 over 1923 (whole year) 35.8 " " 1927 " 1923 (first 3 mths) 67.5

U.S.A.

Increase of 1926 over 1923 (whole year) 8.6 " " 1927 " 1923 (first 3 mths) 17.2

Japan

Increase of 1926 over 1923 (whole year) 27.9 Latest figures not available.

Germany

Comparison with 1923 is impossible but the comparison with 1924 gives the following interesting results:

% Increase of 1926 over 1924 (whole year) +35.0 " " 1927 " 1924 (first 3 mths) 57.0

All the above figures have been worked out on a sterling basis.

Comparing the British position with the above figures, one finds that 1926 showed a 9.4% decrease from 1923 and that the first 3 months of 1927 showed an 8% decrease for the same period in 1923.

I also examined the latest available figures to see the British share in the imports of a number of countries, in this case omitting all reference to 1926 owing to the fact of the coal strike, and I am enclosing a table with the results. The 50% reduction in the British share in the trade of Italy and Japan is particularly striking. If you will examine this table you will, I think, observe how difficult it was for you thoroughly to impress the commercial world of Great Britain in 1923 because, in that year, the disorganization of Germany was giving Great Britain a much larger share of certain European markets than she had in 1913. You will, however, notice that the position in 1927 has, in most cases, resulted in Britain holding a lower share than in 1913.

8th September

THE IMPORTANCE OF ANIMAL INDUSTRIES

I have prepared for the Development & Migration Commission a memorandum on the Economic Importance of Animal Industries. It seemed to me that you would find this of considerable interest and perhaps of use when you are speaking in country districts. I am, therefore, enclosing a copy herewith.

Yours sincerely, F. L. MCDOUGALL

1 The letter is on file AA:M111, 1927.

2 Report of the Imperial Economic Committee on Marketing and Preparing for Market of Foodstuffs Produced within the Empire.

Fifth Report-Fish, Cmd. 2934.

3 George Julius, consulting engineer; Chairman of the Commonwealth Council for Scientific and Industrial Research.

4 Parliamentary Under-Secretary at the Dominions Office; Chairman of the Oversea Settlement Committee.

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

6 Parliamentary Private Secretary to the Chancellor of the Exchequer, Winston Churchill.

7 Stanley Baldwin, Prime Minister.

8 When the Conservative Party lost an election, after a campaign fought largely on the issue of protection.

9 The article, published on 26 August, described research, sponsored by the Empire Marketing Board, into the mineral content of pastures.

10 Senator and Vice-President of the Executive Council; leader of the Australian delegation to the League of Nations Assembly 1927 11 The leader noted the value of Australian preference to Britain and recognised Australia's right to impose protective tariffs. See Letter 122.

12 Times, 30 August and 1 September. Bowden pointed out that Australian protection had reduced imports of British cycles to a negligible level, and he therefore resented the expenditure of British money by the Empire Marketing Board to promote Australian produce. McDougall replied that overall trade figures should be considered.

13 Scottish industrialist; Director-General of Aircraft Production and President of the Air Council 1918.

14 Rupert Beckett, Chairman of the Yorkshire Post and Deputy Chairman of the Westminster Bank.

15 Leopold Amery, Secretary for the Colonies and for Dominion Affairs; Chairman of the Empire Marketing Board.

16 Economist; Fellow and Bursar of King's College, Cambridge.

Keynes had suggested pooling knowledge to develop economics of management and organisation of marketing and transport.

17 'Australia and Empire Trade. Call for Active Development Policy', Times, 7 September.