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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

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

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

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

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

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.


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]
Last Updated: 11 September 2013
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