Extracts WASHINGTON, 8 April 1946

CONFIDENTIAL

THE INTERNATIONAL MONETARY FUND Memo. on the question of
Australian Membership 1. It is not my duty to share the
responsibility of Mr. L. G. Melville as advisor to the Government
on the above subject. My reasons for offering these notes are that
I have watched the course of this international adventure during
my four years in Washington and have seen it develop in its
international setting; that I talked the subject over with
Melville at Savannah [2], when he agreed cordially that I might
make a useful contribution such as I now attempt, and that Senator
Keane has asked me to do SO.

2. I should say at the outset that I have seen Melville's draft
report as prepared before he left Washington, and that I agree
with it entirely. These notes may be useful only as a
supplementary view, as from a different angle. Moreover, I agree
with the scope of Melville's report. [3] It was his duty to deal
with the subject in a severe professional spirit, and with all the
important details, each on their own merits. If I have any duty at
all in this matter, it is not to go over the same ground, but
rather to use my own particular knowledge and experience, coloured
though they may be with international preoccupations.

It seems to be unnecessary for me to refer to the International
Bank. 3. However a great deal of what I have to say may be applied
with equal relevance to the coming series of discussions on Trade
and Employment, which, it now appears, might extend throughout
next year (1947). Melville has very properly linked these
proposals with the Monetary Fund, but my more general view relates
them both to a similar question. Are we -to accept specific risks,
most of which we can anticipate, in becoming parties to
international agreements we dislike, or other but less measurable
risks by remaining outside them?

[matter omitted]

5. I need not go into any details of the Inaugural business of the
Fund. The Fund must inevitably become a dispenser of dollars, and
be mainly a dollar institution. it cannot help being dominated by
the U.S.A., and by the criteria that determine U.S.A. policies in
Washington. The experienced countries must play minor parts, and,
indeed, play up to and flatter the U.S.A. ego, for the sake of the
world, in this business as in all other United Nations'
activities. Australia might behave differently, and with good
effects, because she is not weighed down with the handicaps of
Europe, and is now expected to be a kind of 'enfant terrible'. But
on the whole the members of the Fund must put up with much that
they will dislike and disapprove. Savannah confirmed such fears,
and did nothing to reduce my general scepticism.

[matter omitted]

11. The U.K. The December 1945 U.S.A.-U.K. Agreement, here called
the Loan Agreement, imposes preposterous burdens on the U.K. only
under the most favourable circumstances could they be borne. I do
not think that Lord Keynes dealt frankly with the people of the
U.K. when he addressed them through the House of Lords, except
when he said that the best possible bargain had been made with the
U.S.A. If the Loan gets through the U.S.A. Congress it may be
because Americans are afraid of Russia, and that sentiment is a
poor basis. Nevertheless I am sure that the Agreement as a whole
was a historic piece of statesmanship. The U.K. takes great risks
for the sake of the world, for herself, and for US.

12. We must remember that whoever won the war, it was not the
British. For the moment, at least, the British are a second-rate
Power. And we Australians had better not assume anything else.

Whether we wish to or not (and I think we do not), we can no
longer lean on the U.K. as we did formerly. We can scarcely expect
the workers of the U.K. to go on subsidising our sugar industry,
as they did before the war, through tax-free prices. But we can
still look to the U.K. as our chief market.

13. Before the war, London did a profitable business as a world
financial centre, and will do it again. It was a convenience for
us too, and will be so again. But we cannot expect to lean upon
London financially as we have been wont to do at awkward times in
the past. On occasions we have gone to New York and paid dearly
for it, but New York is not a likely substitute for London at an
awkward time, should our domestic politics become involved.

14. As far as I can judge, the war has strengthened rather than
weakened the association between Australia and the U.K. Indeed the
British Commonwealth as a whole, which at times during the war
appeared to be an uncertain unit, has survived with strength,
dignity, and considerable repute. It is still the only effective
League of Nations or group of independents. But it is the U.K.

that we must rely upon, if on any other nation.

[matter omitted]

17. Australia. I believe that Australia will do well to continue
to 'play' with the U.K. on all serious international matters, but
to continue to accept more responsibility for her own policies
than hitherto. But to what extent? The question goes to the root
of the whole problem of our international economics. I know of no
analysis of it. Melville has furnished a good description of the
situation we might find ourselves in if we become a member of the
Monetary Fund. Other experts are trying to ascertain what might
happen to us under the proposed International Trade Organisation,
from the very tentative ideas so far furnished for conference
discussions. Has anyone devoted as much thought to the question;

how well can we stand alone?
18. 'Wishful thinking' can plague all aspects of the problems
herein discussed. We should not let it deceive us into assumptions
about our economic freedom in the future world. It is not for me
to proffer any answers, for I am too far from home, but I suggest
that the question asked requires the same critical, candid, and
objective analysis as is being given to the various proposals for
our international economic cooperation.

19. The analysis would be more difficult, for there are no
documents before us. There is nothing but the world we live in and
some experience of the past. I suspect that the formal limitations
on our freedom of action we are invited to accept have their
counterparts in certain informal limitations on our freedom, which
a candid analysis would disclose. I suspect that we might have
less freedom than in the past, in the new balance of power, if
international economic plans fail. I suspect that, whatever
domestic policies we may pursue, we shall continue to suffer
limitations in substance. We may modify them, or increase them, by
changing their form. After the suggested analysis has been made,
but not before, an intelligent judgment may be made as to the
wisest choice.

The decision could be that for Australia herself, there may not be
much in it, whether we go in or stay out.

[matter omitted]

If we were in fact friendless, then to be outside the Fund would
not help us at all. I think that, as a rule, we can defend
ourselves inside an organisation better than outside. And I think
that as a member we might be able to invoke action early enough to
prevent most untoward events happening. Indeed, without flattering
ourselves, it could be said that we have something to contribute
to such a body. Perhaps our friends are entitled to expect it.

And, I may as well add, the Fund could become a much more
influential and quicker-acting body than the U.N. Economic and
Social Council, especially in a time of impending crisis.

27. The Fund at present appears to be dominated by an obsolete
pattern of thought, i.e. the U.S.A. pattern of the nineteen
thirties (not of the pre-depression years). It is the fate of all
such institutions. Unless there is growth, the radical thought of
one generation becomes the conservatism of its successor, and the
Fund will not escape that fate. Fortunately, the new economic
thought of the world is almost without form and void. We
Australians could share in its renaissance and contribute towards
the future shape of what will come. I hope we shall do so.

Despite my opening scepticism, my line of thought has led me to
the point of advocacy. Why should I alter my text? It is a genuine
development.

[matter omitted]

31. After reviewing the above considerations, I see no real
alternative to our membership of the Monetary Fund. We have
elected to play a significant part in the new world, and indeed we
can no longer avoid doing so. Responsibilities are thrust upon us.

New, but not necessarily added, risks accompany them. We can take
them.

[matter omitted]

J. B. BRIGDEN