2 Document 37.

3 Economic Adviser to the High Commissioner in London.

Enclosure

Memorandum by Mr F. L. McDougall, Economic Adviser to the High
Commissioner in London

n.d.

The leaders of the Allied Governments have on many occasions since
the outbreak of the war made it clear that Great Britain, France
and the Dominions are not fighting for any territorial
aggrandisement, nor for economic advantages but because Germany
under her Nazi Government menaced the liberty and independence of
European countries and indeed of the world.

There is, however, a strong feeling in many countries that the
Allies should state their peace aims with more clarity than has
yet been the case.

This feeling finds forcible expression in the United States of
America and in other neutral countries, especially among those who
are most anxious to see an Allied victory. Our neutral well
wishers believe that if the Allies would present to the world a
declaration making it clear that they are not fighting to re-
establish the status quo but rather to secure a safe and juster
world in which all nations could co-operate, the result would be
immensely to strengthen the Allied cause.

On the other hand certain of the Allied Governments feel that it
would be difficult, if not impossible, to make a declaration as to
the political and territorial adjustments that will be necessary
once the Nazi regime has been defeated.

If the force of this argument is accepted, does that necessarily
mean that it is impossible for the Allies to make any declaration
on peace aims?
If a distinction is drawn between, on the one hand, purely
European political questions and, on the other, the wider issues,
it should be possible for immediate progress to be made on the
latter while reserving the former for later discussion and
clarification.

The advantages of such a course would be very great, not only in
relationship to public opinion in neutral countries but also
because of the effect upon the mass of middle class and working
class opinion in Great Britain and in the Dominions. A declaration
along the lines envisaged would dispel once and for all the
impression, now so sedulously cultivated by German propaganda,
that the ruling classes in Great Britain and France are fighting
for the defence of privilege and for the maintenance of a
plutocratic capitalism and imperialism.

It is, therefore, suggested that the Allied Governments should at
the earliest possible moment formulate a declaration concerning
their ultimate aims in regard to factors other than the European
political complex.

It may, however, be maintained that for the Allies to make such a
declaration before they have secured important results through
military action or through the pressure of economic warfare would
be regarded as a sign of weakness. It might further be said that
Great Britain and France should have made such a contribution to
world settlement before the war.

Such contentions would neither be historically accurate nor would
they show a proper appreciation of the nature of the struggle in
which we are engaged.

It is well known that the United Kingdom Government on many
occasions in the years immediately preceding the war made it dear
that it was prepared for a general settlement of all outstanding
questions with Germany provided the German Government would give
evidence of a real desire for political co-operation towards
European peace. Progress towards economic collaboration was
regarded as impossible so long as the German leader [1] and his
lieutenants insisted upon conducting political affairs on the
basis of threats.

It could thus be made dear that the responsibility for the failure
to secure a movement towards the rectification of economic and
social grievances rested upon the shoulders of Nazi Germany.

When Germany took the decision to plunge Europe into war, she
compelled Great Britain and France to take up arms to secure the
political conditions which Germany had made impossible through her
huckstering diplomacy. This being the case, the Allies now find it
possible publicly to announce the type of settlement they have
long desired to achieve. They find it the more necessary to do so
because the German propaganda machine is constantly attempting to
suggest that Great Britain and France are fighting to preserve
their own economic advantages and have been mainly influenced by
their hatred of the growing economic strength of Germany. Such
statements are a complete inversion of the truth, as everyone who
remembers the constant efforts of Mr. Chamberlain [2] and M.

Daladier [3] for a pacific settlement must realise.

Now that war has come, the Allies must continue the struggle until
Germany is prepared to abandon the Nazi doctrines and becomes a
country ready for peaceful intercourse with other nations. It can,
however, only help towards the successful outcome of the war and
toward the realisation of the ultimate hopes of a better world for
the Allied Governments now to announce their own conception of the
results which would flow from peaceful co-operation and to
indicate the contributions they will themselves be prepared to
make towards that end.

It would, however, be essential that the suggested declaration
should be sufficiently definite as to be regarded as a substantial
pledge given to the world by the Allied Governments.

The suggested declaration might be along some such lines as the
following:-

I. The Allied Governments regard it as impossible at this stage of
the war to attempt to lay down the political conditions they would
desire to see incorporated in the peace settlement since so much
will depend upon the course of the war, the number of belligerent
countries, and the reactions of the German people.

On this aspect of the Allied peace aims all that is possible is to
reaffirm declarations already made, to emphasise that the security
of all nations is closely involved in the cause for which the
Allies are fighting and to indicate that the opinion of important
neutral Governments will be sought in connection with this aspect
of the peace settlement.

II. The Allied Governments realise that the economic difficulties
which affected many nations during the period 1919-1939 were an
underlying cause of political discontents and tensions. They also
realise that the existence of serious poverty in most countries
and of bitter poverty in certain countries is a condition which
demands resolute action both on the national and on the
international plane.

The effect of the war must be to cause serious economic
disequilibrium which will be intensified when a halt is called in
the production of armaments and when, as the Allied Governments
hope, the world will agree to large scale disarmament.

The Allied Governments therefore believe that immediate steps
should be taken to face the problems which must arise at the
conclusion of hostilities.

The measures which will then be required will be in part national
but unless methods of international action can be evolved in
regard to economic, financial and social co-operation, national
efforts will be severely handicapped and are unlikely to prove
sufficient to meet the requirements of the situation.

Further, the Allied Governments believe that the economic and
social objectives which should be sought, at the conclusion of the
war, should not be a return to the conditions prevailing in the
years preceding the war but rather that all nations should be
enabled fully to develop their economic resources and jointly to
co-operate in a concerted attack upon the problems of poverty.

III. The Allied Governments do not desire at this stage to put
forward any precise proposals in regard to the world problems
indicated in the previous section. They suggest that the main
purposes to be sought should be, firstly, to secure to all nations
the greatest possible opportunities for the development of their
economic life and, secondly, to afford to individuals fuller
possibilities for a progressive betterment of their standards of
living.

They therefore believe that the questions they desire to see
jointly discussed and determined can be classified in two main
groups.

(i) Questions relating to the relative economic opportunities of
countries:-

(a) Colonies
(b) Raw materials
(c) Demographic problems
(d) Commercial policy including trade barriers and international
cartels
(e) Agricultural policy including increase of consumption and the
control of production
(f) Financial problems including the question of capital
requirements, monetary stability, freedom of exchange
(g) Transport questions
(h) Anti-depression policies.

(ii) Questions directly affecting the welfare of the individual:-

(a) Methods of improving standards of living
(b) Health questions
(c) Labour questions
(d) Social protection.

In addition the Allied Governments suggest that early consultation
is required concerning the special problems consequent upon the
war, and the measures taken by many countries to resist
aggression. These problems include:-

(i) Demobilization problems
(ii) Employment questions resulting from the demobilization of
armament industries
(iii) Restoration of the ravages of war.

NOTE: It may be regarded questionable [sic] as to whether the
Colonial problem should be included at this stage in the list of
questions set out above. Its inclusion would go far to convince
other nations of the serious intention of the Allies to make real
contributions and for this reason it seems desirable that Colonies
should be included. If, on the other hand, this inclusion would
unduly delay agreement among the Allies themselves, it might be
undesirable to press for the maintenance of 'Colonies' in the
above lists.

IV. The Allied Governments, recognising that their own major
interests will best be served by the prosperity of all nations,
will be prepared for the fullest exploration of methods whereby
national commercial, financial, agricultural and social policies
can best contribute to international progress rather than become
obstacles to its development. They will themselves be prepared to
make positive contributions towards the solution of all these
problems and desire to discuss the form of such contributions with
other Governments.

V. The Allied Governments do not desire themselves to determine
the methods whereby the joint considerations they are proposing
can best be carried out. They suggest, however, for the
consideration of other Governments that since the 20th Assembly of
the League of Nations has determined upon a separation of the
economic and social activities of the League from its political
functions the new machinery brought into being by the Assembly
might well be utilized for this purpose.

Should other Governments agree to this suggestion the Allied
Governments would propose that the new League Central Committee on
Economic and Social Questions together with the International
Labour Office should be utilized as the means whereby the
foregoing questions may be examined and proposals prepared for the
consideration of Governments.

The action of the Assembly has already made it possible for States
not members of the League to adhere to the new organization for
economic and social work without any involvement in political
questions.

In addition to this the Allied Governments are convinced that
arrangements can be made for enlarging the Central Committee and
for the co-option of representatives of Governments which cannot
see their way officially to adhere to the new organization.

The adoption of this proposal would secure a trained international
secretariat for the study of these problems.

[AA: M103, JANUARY-JUNE 1940]

1 Adolf Hitler.

2 U.K. Prime Minister.

3 French Prime Minister.