My dear Prime Minister,

BUSINESS MISSION

On Monday last I got Duckham [1], Walter Elliot [2] and Casey [3]
to lunch with me in order that Duckham and Elliot might meet and
have a useful and intimate talk. The conversation was chiefly
about the economic importance of the pastoral and agricultural
industries of Australia and Elliot very strongly supported the
suggestion that I had previously made to Duckham that the Business
Mission should see Dr. Orr [4] as soon as he returned.

Duckham warmly agreed and indeed said that if the meeting of the
mission with Orr proved very fruitful, he would try to run up to
Aberdeen and have a further personal talk with Orr during August.

Duckham made it clear that he feels that the Business Mission has
a totally inadequate knowledge of the agricultural side of the
problems that they will have to discuss and he is most anxious to
obtain a good grounding in the matter before he leaves.

I would very strongly suggest that, as soon as possible after the
Mission arrives in Australia, Dr. Richardson [5] should be given
an opportunity of discussing with them at very considerable length
the position in regard to agricultural crops. I do not think there
is anybody who is as sound on this subject as Richardson and he is
certainly no pessimist but rather a sane and reasonable optimist.

On Tuesday evening the British Electrical and Allied
Manufacturers' Association (BEAMA) gave a dinner to Duckham and
Sir Hugo Hirst [6], the main Toast being 'Imperial Development'
proposed by Amery [7] and seconded by Sir Granville Ryrie. [8]
Neither speech was in any way effective. Duckham and Hugo Hirst
replied and I am enclosing the brief 'Times' report of the dinner
and also an interesting verbatim report of Hugo Hirst's reference
to his mission to Australia in his Annual Report to the
Shareholders of the General Electric Company. [9]

At the BEAMA dinner both Duckham and Hugo Hirst showed clearly
that they had a proper idea of the work of the Mission.

I am meeting the Mission formally on July 16th and shall make a
point of having a long talk with each individual member before
they leave.

SIR CHARLES NATHAN [10]

Owing to my illness, I had not been able to see anything very much
of Sir Charles Nathan until he dined with me last week, when we
had a long evening's talk, which interested me very much from a
number of points of view.

Nathan put the difficulties in front of the D. & M. Commission
very clearly but I feel that, under all the circumstances, it is
probably necessary mentally to modify some of the views that he
expressed. He showed the greatest enthusiasm for the work of the
C.S.I.R. Naturally we got into a discussion of Australian economic
development and he said that it did not matter very materially how
we used the tariff so long as, through the tariff, we created new
industries.

I told him that I thought that this view was only tenable on the
basis of Australia being able to borrow almost unlimited sums of
money without serious difficulty and that, although increased cost
of production due to a high general tariff might not affect the
possibility of Australia exporting wool and wheat at a profit, yet
if Australia was really to develop at a more rapid rate, it was
essential that other export industries, such as the dairying
interest, for example, should be on a profitable basis.

Nathan then put forward what is a very normal point of view,
namely that Australia's rate of development of 2% per annum was
really very satisfactory and compared favorably with that of other
countries during their equivalent stage to that in which Australia
is today. I wonder really whether that point of view is sound. You
have in Australia 6 million really virile people who, in the year
of grace 1928, are armed, or ought to be armed, with all the
inventions of science to assist them in the more rapid development
of their country. I think that idea is one of great interest and
one which you might find extremely useful in some speech in
Australia. I, therefore, propose, if possible before the next
mail, to elaborate the idea somewhat and forward it to you.

BRITISH ECONOMIC POSITION

In spite of what really appeared to be a better economic outlook
in the first four months of the year, 1928 is reverting to post-
war type and the extreme optimism with which the Government and
the Bankers, and indeed the business community, generally welcomed
1928 is giving place to realisation that the year is not going to
see any substantial improvement in trade. The unemployment returns
show that there are over 120,000 more unemployed now than a year
ago and I am confidentially informed that the Government
anticipates a further substantial increase in unemployment during
the latter half of the year. I have also been told in confidence
that the report of the Industrial Transference Board [11], which
consisted, as you will probably remember, of Sir Warren Fisher
[12], Sir John Cadman [13] and Sir David Shackleton [14], is going
to approve a document which will not assist. It seems clear to me
that schemes for the transference of men, either within the United
Kingdom or for overseas settlement, are rather hopeless and that
we should all be well advised to talk less and less about the re-
distribution of population and more and more about the importance
of development. If we can once persuade the people of this country
that it is to their direct economic advantage to throw all the
energy, capital and brains that they can spare from internal
affairs into the development of the most promising parts of the
overseas Empire from a developmental point of view, then we shall
automatically achieve the transference of population which is
making such dreadfully slow progress while we think in terms of
migration rather than of development. This I know is your own
point of view but I am not at all sure that the time has not come
when it is necessary to say it even more definitely than it has
been said in the past. Perhaps the Business Mission on its return
may be able to put that point of view through with authority but
not as the scribes; in other words to put it forward as a
considered business point of view and not as a Government
statement.

POLITICAL

Nothing that has happened recently, either in the House or in By-
elections, has given any clear point of view on the political
situation. There is little doubt that the Budget and the Rating
Bill [15] are the first really constructive measures which the
Government has taken to assist the industrial situation and on the
whole my impression is that they are being well received and that,
as a consequence, in spite of the serious economic depression, the
Government may be able to go to the country in a year's time and
claim to have been the only Party able to bring forward a definite
constructive programme from a realist's point of view. On the
other hand, there seems little doubt that Rothermere [l6] is going
to maintain his vendetta against Baldwin [17] and may, for this
purpose, form a definite alliance with Lloyd George [18], bringing
the whole of the Rothermere press to the support of L1.G. It is
extremely difficult to gauge the value of an alliance of the
Rothermere Press.

My own fancy is that the stunt press, when suddenly mobilised on a
stunt such as the Zinoviev letter [19], has a very marked effect
on votes but I am much more doubtful whether the consistent
campaign of calumny undertaken by the Rothermere press over a
period of years does not, on the whole, improve the electoral
chances of the victim. One fancies, and indeed hopes, that the
public mind recognises the rotten motives of the press potentates
and their satellites when sufficient time is given for the whole
campaign to sink into the public mind.

The Labour Party are once again in an extremely difficult position
owing to the revolt of Maxton [20] and the fact that the I L.P.

are, on the whole, supporting him as their Chairman. I do not
think Maxton will get much support in the Parliamentary Party and,
after all, there is a full year before the election and the
crippling effect of the revolt may have been dissipated before
that takes place. Nevertheless I cannot see any strong probability
of a great swing of votes towards the Labour Party.

So far as the Liberals are concerned, here again one can see no
sign of any real Liberal revival and the Lloyd George-Rothermere
alliance, while it might swing a certain number of the unattached
into the Liberal camp, would probably horrify Asquithian Liberals
[21] and intensify their smouldering dislike for L1.G., with the
result that many respectable Liberal votes would be cast for the
Conservatives, as certainly happened in 1924.

On the whole one is inclined to feel that the probabilities of the
moment are that the Conservatives, while losing a very
considerable number of seats, are likely to be returned to power
with a small majority.

THE HIGH COMMISSIONER FOR NEW ZEALAND

I cannot refrain from drawing your attention to a most
extraordinary, request that I received from Sir James Parr the
other day. I am enclosing a copy of a letter [22] which his
Private Secretary sent to me, because I feel sure that it will
amuse you. I cannot imagine how the High Commissioner of a
Dominion could so insult his own office as to send out, through
his official channels, a request to me to assist him in preparing
an article of the sort mentioned. I was also intensely amused by
Sir James Parr's note 'I am very busy!' My first inclination was
to write back merely saying that I was possibly busier but I
finally decided to throw a few notes together which I sent back to
Parr with the comment that pressure of work prevented my making
them more elaborate. [23]

Yours sincerely,
F. L. MCDOUGALL