3rd September, 1925
PRIVATE & CONFIDENTIAL
Dear Mr. Bruce,
From cabled accounts of happenings in Australia, I conclude that you are having an extremely busy time. The shipping strike must be a source of the gravest anxiety to you.  The visit of the Empire Press Delegation , although it will doubtless afford some interesting occasions, must involve you in considerable additional work and this morning's papers give a resume of the new tariff schedules which I imagine will give rise to some rather vigorous parliamentary discussions. 
The Intelligence Department here is sending you a copy of the September 'Fortnightly Review'. It contains a fairly interesting article by Mr. Archibald Hurd  on Empire Development, drawing attention to the reports of the Imperial Economic Committee, 'Sheltered Markets', the Labour Party's report on sweated imports and your comments on this report. It suffers from being more of a resume than being anything constructive but at the same time I think you will be interested to read it.
HOUSING IN RUSSIA
I am enclosing cutting from the 'Times' dealing with the 'catastrophic' conditions of housing in Russia which I think you may find of very considerable value at the present time. Even to the outsider it is becoming clear that Russia and the communists generally are putting into operation plans against the welfare of the British Empire. The Chinese trouble  followed by the shipping strike are two moves well calculated to embarrass the British Empire to a most serious extent because there is no possible doubt but that the Empire now depends, and must continue to depend, for a large number of years upon the economic strength and prosperity of the United Kingdom.
I do not know whether my views on this subject are of any use to you but it appears to me that, from the Russian and communists' standpoint, they are perfectly right in selecting the British Empire for attack. The Empire stands for everything that Russia and the communists particularly dislike and in particular it stands for a broad based and enlightened nationalism. I imagine that nothing can have given the communists greater umbrage than the present movement in the British Labour Party in the direction of Empire. The more we can develop that interest the more effectively shall we be able to counter the propaganda which I must say appears to me to be quite cleverly engineered.
The British Labour Party has before it three paths to choose from.
On the extreme left there is Soviet Russia, the dictatorship of the Proletariat. The means to obtain this end [is] continuous wrecking tactics so far as British industry is concerned so as to render the condition of the worker, the taxpayer and the Government of Great Britain impossible. I think that few, if any, of the British Labour Members, with the exception of Saklatvala , the Battersea Communist, consciously adhere to this programme but I am afraid that a number do not recognise its dangers and quite a lot are still hypnotised by the latent possibilities of close friendship with the Soviet.
Ramsay MacDonald  and his school adhere to their old programme of international socialism and the solution of problems through inter-national action along constitutional paths. I suppose it would be accurate to say that the bulk of the Labour Party nominally take this view but their position is rendered extraordinarily difficult by the white anting of the communists in the constituencies and by the very vague and shadowy prospect of reaching any real solution of urgent problems along those lines.
The third and new path which is opening itself to the Labour Party is within the Empire. There is still a great deal of confusion of thought on this subject and among the old guard a very considerable degree of suspicion and hesitation but the most satisfactory and interesting feature of the situation is that interest in the Empire questions is not confined to any one section of British political labour.
On the extreme right we have Thomas , ineffective in the counsels of the party but most effective so far as a large section of the public is concerned. Haden Guest  must also be considered as a right winger but he is not under suspicion in the party in the same way as Thomas. Among the solid old guard trade unionists there is a very considerable element now beginning to take an active interest in Empire questions and from this section I look for steady, if perhaps rather slow, development in our direction. The so-called Labour intellectuals in Parliament have so far been of remarkably little use to us. They almost all belong to MacDonald's International Socialist Group.
We now come to the most interesting section, the left of the Parliamentary Party. It is here that Empire ideas have been able to make the greatest progress and fortunately to obtain the support of the two most influential men in this Group, namely Tom Johnston  and George Lansbury.  I attach the utmost importance to the left wing because they can preach 'Empire' in their own way and in their own words without being branded as reactionary imperialists.
In connection with the education of British Labour, I attach very great importance to the Empire Parliamentary Association's visit to Australia next year. D'Egville , with whom I am constantly in touch, tells me that the Australian Parliament has invited 16 British Delegates to the Conference in Australia. I hope that it will prove possible to include at least 6 Labour Members and to get the right men and this for two reasons: firstly because of the effect which the trip would have on the men selected and, secondly, because of the reflex action upon Labour in Australia.
There is very little well informed opinion in the British Labour Party about the Australian Labor Party. The general impression seems to be that the Australian Labor Party suffers from a narrow realism, so far as Australian affairs are concerned, expressed in adherence to anti-immigration policy and to the doctrines of exaggerated protection. This opinion is in curious contrast to the Australian Labor Party's overseas policy which appears to be dominated by cloudy vague idealism so characteristic of MacDonald and his particular group in the British Labour Party.
MacDonald is having, at the present time, a very severe struggle to retain his influence in the Labour Party. His attitude over the recent Coal strike has infuriated the Trade Unions.
In the whole of this connection I am very glad to be able to tell you that 'Sheltered Markets'  is having, and seems likely to continue to have, very considerable influence both among Labour Members of Parliament and among Trade Union people.
Coming back to the enclosed cutting, what I particularly want to draw your attention to is the light which it throws upon the standard of living in Russia under the Soviet Government. I believe it is true to say that the general standard of life in Russia in 1924 was lower than in 1913 under the Czar and this seems to me to render extraordinarily ridiculous the Communists' appeal for a united front of British workers with the workers of other countries but particularly with Russia to establish a dictatorship of the Proletariat.
If the British Labour Party's interest in the Empire can be increased and stimulated and if they will bring to Empire problems some Labour and Trade Union principles, it seems to me that the Empire would have everything to gain and nothing to lose by Labour's active participation in the discussion [and] solution of Empire questions.
NOTE ON ECONOMIC MEMORANDUM
With reference to the memorandum which I sent you in my last letter about the economic position of Great Britain and particularly with regard to the section dealing with price levels, I am enclosing the most recent set of commodity prices and index numbers from the 'Times'. It appears to me that some very interesting work could be done on this. You will notice that in April 1920 the index number of foodstuffs was 301.2, of materials 382.8 and the total index number was 352.9. I suggest that the great expansion of Australia's industrial production occurred during the period of very high price levels. To-day the position is reversed. The food index number is 163.1 and the materials 156.6 but this obviously does not represent the whole position for, included in materials, we have raw materials with cotton with an index number of 208, wool at 201/2d. per lb. and rubber at 3/61/2d.
If my memorandum on this subject interested you at all, I would suggest that you ask Wickens  to see whether he could find a basis for estimating the change in the purchasing power of the value added to materials in process of manufacture. So far as I have time I shall follow this matter up somewhat further from this end.
IMPERIAL ECONOMIC COMMITTEE
Since I last wrote I have had two long conferences with the Secretary of the Economic Committee  in reference to the scope and form of the Fruit Report and we have drawn up an elaborate draft outline for the Fruit Report along the lines which I indicated in my letter to you of August 27th. I am proposing to get in touch with a number of Members of the Committee before its sittings are resumed, so as to have some agreement beforehand and thus be able to make the Fruit Report a more important and interesting document than the Meat Report.
You will be glad to know that the information that I forwarded to you and to the Dried Fruit Board in April in reference to the probable effect of the winter drought in Smyrna upon the Smyrna crop of sultanas has proved to be correct. The Smyrna crop will be about 28,000 tons as against 50,000 last year and I understand that the Smyrna quality is also affected.
This is having an excellent effect on the sales of Australian sultanas and I can only 'impiously' wish that a combination of drought, diseases and Haden Guest may strike the Greek currant crop next season. 
Yours sincerely, F. L. MCDOUGALL