My dear Prime Minister,

I have now read the British Economic Mission's Report. [1] On the
whole it seems to me to be a most useful document and quite
remarkably well written. The policies which you have stood for are
supported to a remarkable extent and I was particularly pleased by
the extremely cordial references to the Development and Migration
Commission and to the Commonwealth Council for Scientific and
Industrial Research.

I thought the best parts of the report were the sections dealing
with Protection. They were tactful but clear and should prove
illuminating to those who have not really thought about the
subject; in other words, to the vast majority of business men and
politicians.

I was a little perplexed by the suggestion that the 34,000,000
agreement [2] should be extended to cover Scientific Research for,
at the moment, I fail to see how more than say at the outside
500,000 per annum could be spent even on very large scale
demonstrations of the value of research.

The paragraphs advocating intensive rather than extensive
development were entirely in harmony with the point of view I have
come to hold for some years, and I consider their remarks about
Migration as useful and judicious. My only major criticism is that
the tone of the report is rather negative. To those with knowledge
to read between the lines, this is more apparent than real, but,
to the uninitiated, the negative insistence upon economy will be
the main effect.

There is one very general criticism of the policy of Economy and I
do not think that here the problem has been fully faced. The
British case may, perhaps, afford a useful illustration for
Australia.

For the last six years at least the declared policy of each
successive British Government has been economy. This policy aims
at a reduction of taxation, a series of successful conversion
loans, etc. in order to reduce the cost of production which is the
main handicap of Great Britain in her oversea trade. But Great
Britain has, through her social services, through the power of her
Trade Unions in the sheltered industries, and through the heavy
War taxation, a very long way to go before she can reduce costs to
European standards. It therefore follows that a policy of economy
to be successful must be ruthlessly carried out over a
considerable period of years. The question that has not been faced
is whether a modern democracy will endure the strain? Take the
history of the last six years in England. The official policy has
been economy but Governments have been forced to increase social
services, to give the coal mining subsidy, to face the losses and
expenditure of a General Strike and the Coal stoppage and to
contribute to an Unemployment fund which has tended to increase,
rather than diminish. Is there any reasonable prospect of a better
state of affairs during the next three or four years? Assuredly
not, for the country is almost sure to be faced by political
deadlocks and by a series of General Elections, occurrences not
conducive to Governmental economy. It therefore seems as if the
Government ought to consider whether an Economy policy can be
effective under all the conflicting stresses of the present times.

What is the alternative policy? Is it not a policy of development
at home and in the Empire? May it not be better to recognise that,
in a modern democracy, one cannot go back upon social services;

one can only reduce standards of living at the cost of grave
political crises.

The object of the economy policy is to reduce costs of production
and thus to enable the country to compete more effectively in
world trade. This object could perhaps be obtained through a wise
policy of development. If the country's resources were used to
speed up developments such as the electricity schemes, and above
all to assist in the development of those Dominions and Colonies
which obtain a great proportion of their imports from Great
Britain and also those which prefer to receive British settlers,
might not the result be to give a larger taxable income, and thus
to reduce taxation, and to decrease costs of production by the
encouragement of a greater output per unit with lowered overhead
charges.

These points seem to me matters which the Government here ought
urgently to consider but they do seem to have some bearing upon
the British Mission's report. The policy recommended is not a pure
Economy policy, such as that to which British Chancellors of the
Exchequer pay lip service, but it has large elements thereof.

Curtailed extensive expansion, calling a halt in protection, etc.

I believe both these points are sound but I also feel they can
only be made acceptable to the democracy of Australia if,
simultaneously, we carry out a bold and vigorous policy of
intensive development. This the Mission has recommended but has
not emphasized, perhaps wisely. [3]

It is probably true that if things go on in their present way, we
shall, within 30 years, double the production of wheat, of butter,
of mutton and lamb, and of other agricultural crops from our
present settled areas. If this can be done in 30 years, can we
not, by effort, achieve the result in 5, and thus secure the
benefits of cheapened production, and a substantially increased
population without having to attempt to discipline the people to
stand up to a severe economy campaign? Perhaps schemes, such as
the one I sent you on the Dairying Industry [4], might be adopted,
probably many others far better will occur to you. Intensive
development should require far less expenditure than extensive. It
should yield much more rapid returns, it should involve less risk
but it will require the cooperation of the scientists and the
practical man; in short it will require far more brains and energy
than the policy of extensive development which we have in the past
adopted both in regard to our primary and indeed also to our
secondary industries.

Yours sincerely,
F. L. MCDOUGALL