My dear Prime Minister,

I was very pleased to receive your long letter of April 30th. [1]
It was good of you to give me so interesting a commentary upon
affairs and upon my recent letters to you. Naturally I also very
greatly appreciated the kind way in which you referred to my work.

If occasionally I can receive a letter from you which enables me
to see how your mind is tending on subjects which are of concern
to me, I can get along quite happily without expecting rapid
responses to my many epistles.

I very much regret that you are finding it necessary to work as
hard, or even harder than you did during the previous Parliament.

I can only hope that political affairs will so clarify themselves
as to allow you to take things at a more reasonable rate. I hope
you are not feeling that the pace is affecting your health, for I
am certain that, from an Empire point of view, your influence upon
affairs is only commencing and that, given fitness and continuance
in office, you will be able to do more than any other person to
bring about that closer economic cooperation upon which the
prosperity and happiness of so many people depend.

The outstanding fact of the moment is the resignation of Baldwin
and the King's summons to MacDonald. [2] The Election was a
surprise and most forecasts were hopelessly out. The swing to
Labour was anticipated in the North and the Tories were expected
to lose very heavily in Scotland, while most people expected a
Liberal revival to result in at least a party of 100 to 125.

Actually the industrial North went, as expected, almost wholly
Labour but Greater London was a surprise, Labour winning far more
seats than anyone expected. Labour also recorded more gains in the
Midlands than anyone anticipated. On the other hand, Scotland
showed only small changes, and the Liberal revival simply missed
fire. The Liberals ran 511 candidates and spent over 750,000 and
secured less than 60 seats. I have never believed in the Liberal
revival, at least under Lloyd George. As Lincoln said: 'You can
fool all the people some of the time, some of the people all the
time, but you can't fool all the people all the time'. The
rejection of Lloyd George's 'cure unemployment quick' schemes in
spite of lavish advertisement, the support of Runciman [3], Simon
[4] and Lord Grey [5] and the general support of Rothermere [6]
and Beaverbrook [7], argues a certain 'horse sense' in the British
people which is reassuring.

Baldwin made the opposite mistake. 'Safety First' is not the
slogan to win the support of youth and it is not the way to
British prosperity. Lazy thinking and self-complaisance were the
besetting sins of the last administration. As I told Amery,
Ormsby-Gore and Elliot [8] not once, but a dozen times in the last
two years, the Tories were damned not by sins of commission but by
sins of omission. My deep conviction of this emboldens me to
suggest that it is important for the Commonwealth Government to
bring forward definite practical measures to deal with some of
Australia's problems and I have a little anxiety lest the careful
sifting of problems by Committees may defer action too long. I
shall illustrate what I mean when I come to the Dairy industry at
a later stage in this letter.

The personnel of the new Government is not likely to be announced
until after the mail closes. I am hoping that, in the offices
which are vital to success on the economic side of the Imperial
Conference, we may get men who will have an interest in Empire
affairs and some ability and force of character. J. H. Thomas [9]
has told both Cooper [10] and myself that Ramsay so desires to be
Foreign Secretary that he will suggest Thomas as Prime Minister.

This I do not believe, for MacDonald's vanity is immense and I can
hardly imagine his allowing anyone else to secure the leadership.

Thomas, however, is entitled to claim any office save that of
Chancellor. Whether he will take Dominions and Colonies or not
cannot yet be known. If he does not, then the position may go to
Tom Johnston [11], although it would represent very rapid
promotion, probably much too rapid. George Lansbury [12] has been
tipped but that would be a joke. I sincerely fear the possibility
of William Lunn [13], who is very third rate. At the Board of
Trade I hope to see William Graham [14], but fear Alexander [15],
a bigoted free trader.

Among the probable members of the Cabinet I should, from present
knowledge, regard the following as useful from an Empire
standpoint: Thomas, Clynes [16], Graham, Dalton [17], Johnston and
Miss Bondfield [18], together with Lunn in a useless way.

The state of the Parties is now pretty clear. There are 6 results
still to come. Oxford University 2 seats, Scottish Universities 3
seats and Rugby. Labour may win Rugby and the Liberals will hold
one Scotch University seat. This will give Labour 289, Tories 259,
Liberals 59 and Independents 8. of the 8 Independents, 3 will
normally vote with Labour, I with the Liberals and 4 with the
Tories; so that the nett result may be regarded as Labour 292,
Tories 263, Liberals 60. Comparison with 1923 is illuminating. The
Tories are at almost exactly the same strength but whereas in 1923
the Liberals held 159 seats, today 100 of these have gone to
Labour.

I am amused to find among the people I have met, almost equal
rejoicing over the elimination of Saklatvala [19], the Indian
Communist for Battersea, and Sir Harry Brittain. [20] Further
comment is needless. The more unfortunate results have been the
elimination of quite a number of the useful younger brigade among
the Tories. The crusted veterans of the Party intended to hold the
safest seats and many of the young men who were shewing
considerable promise held dangerous seats, which, in many cases,
have been lost. Harold Macmillan [21], H. G. Williams [22], Duff
Cooper [23], R. S. Hudson [24] and Cochrane [25] are noteworthy
examples. Walter Elliot, Ormsby-Gore and Bob Boothby [26] have all
been returned, as also has your friend Glyn. [27]

THE LABOUR GOVERNMENT AND THE IMPERIAL CONFERENCE

Naturally one cannot expect the new Government to form any ideas
about the next Imperial Conference for at least a month but as
soon as I know the personnel of the 4 offices-the Secretary of
State for the Dominions and Colonies, the Under-Secretary for the
Dominions, the Under-Secretary for the Colonies, and the President
of the Board of Trade-I shall begin to take steps to impress on
these people the importance of their recognising that the
preparatory work for the Imperial Conference should be pushed
ahead. I shall probably send you a cable in about a week's time
suggesting that, after the Government has been in office for a
fortnight or so, it would be wise for you to send a cable pointing
out the immense importance which you attach to the economic side
of the next Imperial Conference, telling them of your intention to
study the problems as fully as possible and urging that it is to
the manifest advantage of both Great Britain and Australia that
the preparatory work for the Conference should be of such a nature
as to guarantee important and useful discussions leading to the
formation of sound plans for Empire development. I should probably
also suggest that in such a cable you might mention the
desirability of discussing at the Imperial Conference the attitude
of British Empire Countries to the economic activities of the
League of Nations and the I.L.O. I think that a suggestion of that
sort, coming from you to the Labour Government, would increase
their interest in your cable.

Having initially aroused the interest of the Labour Government in
their task of meeting the Imperial Conference, I then think that,
in two or three months' time, it will be wise to start suggestions
that any reductions of preferences in the 1930 Budget, occurring
as they would just before the Imperial Conference, would be a
frightful mistake of tactics from the Labour Party's point of view
and might damage them very severely in the country.

The other matter of outstanding importance will be the Empire
Marketing Board. I do not think there is any doubt that the Labour
Party will continue to support the Board but I shall do my utmost
to try and get them to realise, in a clearer way than Churchill
[28] made it possible in the case of the Conservatives, that the
E. M. B. fund is really Imperial money and as having been placed
irrevocably at the disposal of the whole Empire.

It is too early to form any impression whether the change of
Government will involve any important changes in the E.M.B.

policy. The only thing that one can forecast is that the Labour
Party will probably want the Board to undertake some important
preliminary investigations into the possibility of bulk purchase
schemes and to investigate more thoroughly such questions as the
margins that exist as between the retail and wholesale prices in a
number of commodities.

YOUR LETTER OF APRIL 30TH

I have already expressed my great appreciation for this letter and
will now deal with some of the points which you raise.

I was extremely interested in what you were good enough to say
about the political situation in Australia but, of course, can
make no useful comments. [29]

Philip Snowden [30]

The first point, therefore, that arises in your letter is your
remarks about Philip Snowden's article in 'John Bull' entitled 'Is
the Empire bleeding Britain white'. [31] Now that he is in office
again, this must be used as ammunition against him should he take
any line which we strongly desire to check. I shall try and see
that effective use is made of this extremely bad 'faux pas'.

American Competition

At more than one point in your letter you comment on the data that
I have supplied on the subject of American competition. [32] The
memorandum entitled 'The Growing Dependence of British Industry on
Empire Markets', which I forwarded to you by last mail, [33] will
have given you a good deal more information on this subject and
has brought the figures up to date. There cannot be any doubt that
you were right when you forecasted that, by the time the next
Imperial Conference meets, the position of America in world trade
will be about the biggest economic fact which we will have to
consider. I expect that you have arranged with Herbert Brookes
[34] to supply you with a good deal of information. I shall write
to Brookes myself asking him to let me have anything that he finds
of special interest.

Economic Mission

There has been a considerable amount of delay in setting up the
Committee which Duckham [35] asked for in order to follow on and
clear up the work of the Business Mission to Australia. The
British Government's consent to the formation of the Committee and
the appointment of a whole time Secretary was only received about
ten days before the Election and Duckham has not been very well
and has been taking a couple of weeks' holiday at his home.

The first meeting of the Committee has now been summoned for June
18th and after that I shall be in a position to judge what use the
Committee is likely to prove.

I was, of course, extremely glad to find how satisfied you were
with the work of the Mission. [36]

Intensive Development and Dairy Industry

This question is so important that I will deal with it at a later
stage in this letter.

Governmental Economy

I was very glad to find that you agreed so heartily with the views
that I had expressed in my letter of February 20th [37] about the
futility of an economy policy to solve the problems which face
countries such as Australia or Great Britain. In both countries,
though in different degrees, a standard of living is maintained
which is considerably above that of our main competitors. The
result of the General Election seems to me a fairly clear
indication that an economy policy cannot be made acceptable to the
people. The sooner Great Britain and Australia realise that the
only possible basis upon which a high standard of living can be
maintained is high efficiency of production, the better it will be
for both countries. The Australian dried fruit industry, for
instance, cannot possibly hope to maintain itself in perpetuity
with a wage of about 12/6d a day in face of wages of 2/- a day or
lower in Smyrna, Greece and Spain, unless it can achieve a higher
average yield per acre and a higher general efficiency of growth
than its low wage paying competitors. Again, the Australian sugar
industry ought to regard the closer approximation to the yield per
acre achieved in Java as a necessary concomitant to the complete
protection which the people of Australia afford to it; while the
Australian dairy farmer ought to urge his leaders to use their
brains in assisting him to double the yield per cow rather than to
elaborate further refinement of schemes, such as the Paterson
scheme. [38]

Report on the work of the I.E. C. and the E.M.B.

I am glad that you approve of the suggestion that I should prepare
a report which, if it proved suitable, you would probably lay on
the table of the House. I shall take the matter in hand at once
but you will realise that this first report must necessarily deal
with the work of both Bodies since their inception. It is possible
that you may feel it desirable for me to prepare an annual report
following on this first effort but that is a question that had
better wait until you have seen the first report.

Rome and Geneva

I have already sent you quite a lot of information about this, as
a result of the work of the Economic Consultative Committee, but
the change of Government in this country now gives a greatly
increased importance to the subject of British Empire cooperation
with International Bodies. The Labour Party has consistently
attacked the Conservatives for a lukewarm attitude towards the
League of Nations and particularly the I.L.O.

I am extremely glad that you agree with me that the only line
which we can afford to take is one of cooperation with these
Bodies in order that we may exert a modifying influence upon their
activities. [39] With a Labour Government in power here, this will
become all the more necessary.

I suggest that a line of country which we might very effectively
take is that the British Empire contributes about a quarter of the
whole of the finances of the League of Nations and that, while the
British Empire does not wish to check the activities undertaken at
the request of foreign countries, yet we have a right to demand
that, in return for our very large contribution, we should receive
some direct return in the form of services along lines that we
regard as desirable.

I feel rather strongly that, at the last Assembly of the League of
Nations, the British Empire attitude on the League Budget was
unfortunate. A series of criticisms on minor points were put
forward which had the nett effect of suggesting an attitude of
carping criticism. The alternative policy, it seemed to me, was to
have made a frank declaration that there was no desire of any sort
to reduce the Budget of the League but that we believed that, in
some directions, and particularly through the I.L.O., a number of
comparatively unimportant sideshows were absorbing considerable
sums of money and that more effective work could be done by
concentration upon matters of wider International interest. Among
such types of activities one would, of course, include the
provision of comparable information and statistics not only by the
Economic Organization of the League but also on labour conditions
throughout the world by the I.L.O.

Imperial Conference

I shall not burden this letter, which is already destined to be of
great length, with replies to the issues that you raise on the
Imperial Conference but will deal with these questions in a
separate letter.

HOFMEYR [40]

I am now able to enclose a report of the speech made by Hofmeyr,
about which I wrote to you in my letter of the 24th May. I hope
that you will find time to read it.

INTENSIVE DEVELOPMENT IN THE DAIRY INDUSTRY

The part of your letter which perhaps interested me most was where
you dealt with what the Commonwealth Government is proposing in
regard to the dairy industry. It is always a great pleasure to me
when I find that, in making a proposal to you, I have simply been
thinking along the same lines that you have been meditating upon
yourself because this is a demonstration that I am able to keep
fairly well in touch with you. Incidentally I find that, in my
correspondence with Rivett [41],time after time both he and I
arrive at the same conclusions, more or less simultaneously, and
our letters expressing these similar [ideas] on the same problem
cross one another at sea. There can be no possible doubt that the
steps that you have already taken are very sound but the point
that I should like strongly to urge is as follows:

You have set up a Committee under Richardson [42] to investigate
how to accelerate the efficiency of the dairy industry. The
conclusions which Richardson's Committee will reach will doubtless
be quite numerous and varied but I suggest that if, by the time
this letter reaches you, you have not received an interim report
from Richardson, you should ask him whether his Committee cannot
definitely state that there are certain things which stand out as
being immediately both desirable and practicable.

I am just a little afraid lest the Committee should spend too much
time on investigation before presenting a first report. I am
perfectly certain that John Orr [43] would say that there are
certain plain and simple things which can be immediately achieved
without any further enquiry.

In your letter you mention herd testing, improvement of herds, the
better standard of bull and more inspectors to advise and assist
the producer. You do not, however, mention what I am sure Orr
would regard as the first essential, namely better feeding. Now
better feeding falls under two heads: quantity of food and quality
of food. Quantity of food does present a good number of problems
which I have no doubt Richardson's Committee will fully
investigate. These problems include improving the pastures
themselves, methods of conserving fodder, provision against
drought through such schemes as the highly transportable grasscake
and many other matters, but when one comes to the quality of
feeding, which I believe Orr would maintain to be of very
firstclass importance, there does not seem to be any reason why an
immediate recommendation should not be made.

Orr and Theiler [44] both satisfied themselves that in most
districts in Australia, and certainly including most of the
dairying districts, there existed serious mineral deficiencies
profoundly affecting the health of the cattle and consequently the
yield of the cows. I think I told you in an earlier letter that
Orr said that on the south coast of N. S.W. he saw cattle standing
knee deep in Paspalum but that these unfortunate animals were
unable to make satisfactory use of the masses of food that were
available because that food was deficient in phosphate. I
therefore cannot help believing that it would be possible for your
Committee to make an immediate recommendation that steps should be
taken to facilitate the supply of satisfactory salt licks to dairy
farmers and also to assist dairy farmers to understand the
importance of the top dressing of pastures. To carry this into
effect it would be necessary to have an arrangement whereby
(a) the pastures of the various dairying districts were analysed
to show their mineral contents and thus to indicate what
deficiencies ought to be made good by salt licks or by top
dressing. In most cases the supply of some form of phosphate, such
as bone meal, direct to the cattle would make a very great
difference but there may be districts in which it would be
necessary to add to the salt lick small quantities of potassium,
iodine, or even of iron or possibly manganese. In certain other
districts the main deficiency may be calcium but an analysis of
the pastures would immediately show what was lacking.

(b) Having obtained for each dairying district a sound
appreciation of the mineral deficiencies affecting the efficiency
of the cattle, the next step would be to see that farmers
understood the importance of sound feeding. On one simple subject
like this, it would seem to me that a letter addressed to the
farmers of each district by a Central National Committee would
arouse their attention and interest. In addition I should have
thought that a series of broadcast talks could have been arranged
and lectures given in the districts by specially qualified men.

(c) Having first shewn the minerals that are necessary and,
secondly, taken steps to arouse the interest of farmers in the
matter, the next step would be to see that the farmers could
obtain suitable salt licks as cheaply as possible. Orr told me on
his return from Australia that quite a number of Mushroom
Companies had sprung up to supply salt licks to farmers and that
these salt licks had no necessary relation to the actual mineral
deficiencies in the districts in which they were sold and that, in
addition, prices of up to 20 per ton were being charged for salt
licks, the ingredients of which did not cost the producing company
more than about 6. Orr's solution was to get the various big
Pastoral Companies in association perhaps with one or more of the
Fertilizer Companies to create a small subsidiary Company for the
provision of salt licks according to the recognised deficiency of
the various districts in question at a price which would yield the
subsidiary Company a profit not to exceed say 10%.

Possibly I am underestimating the difficulties of making rapid
progress but I should have imagined that an immediate
recommendation along these lines might have been made and put into
action with quite a small expenditure of money and without the
creation of a large number of inspectors.

I have gone into this matter at some length and touched on a
number of details in which you may not be interested and I quite
anticipate that you will not yourself want to bring forward
technical matters connected with phosphates, iodine, calcium, etc.

I have, however, elaborated this in order to make points that I do
feel to be extremely important, and the point is this, that while
I emphatically agree with the desirability of the Commonwealth
Government obtaining the very best expert advice before it commits
itself to action, yet at the same time there are economic and
political dangers in undue delay in putting forward solutions for
Australia's very pressing problems.

As I see it nothing is more urgent for Australia than to achieve a
greater efficiency of production in some of the industries that
will lead to export. I would, therefore, very tentatively suggest,
for your consideration, that when you ask a Committee or the D. &

M. Commission to investigate a problem and to report, you might
consider asking them to take their investigation in two or three
stages and that if, after a preliminary survey of the situation,
they are able unanimously to state that there are one or more
outstanding things which, if adopted, would immediately have an
important effect, then the Committee should present an urgent
preliminary report recommending action along such lines.

In regard to the dairying business, I shall, without any reference
to your letter or to this communication, write to Richardson about
the feeding side. He will regard this as perfectly natural because
he knows how intensely interested I am in that problem. I should
also inform you that I have received a cable from Gepp [45] asking
me to obtain a good deal of information from British sources which
I assume is for the purpose of this investigation.

Beef

There is one other question that you raise in your letter and on
which you have been good enough to ask me to express my view, that
is on the assumption that the dairying investigations, to which
you have already appointed a Committee, prove a success, as to
what industry to take up next. You suggest the beef industry and I
quite agree that that would be very desirable. At the same time I
should regard the beef industry as being a little more long range
than the dairy industry because the success with the beef industry
must involve first better feeding, secondly better breeding and
thirdly improved refrigeration conditions.

Mutton & Lamb

While I should strongly support the Commonwealth Government in
taking up the question of the beef industry, I would suggest that,
simultaneously, steps should be taken to stimulate a greater
efficiency in production of mutton and lamb and, perhaps, also of
pig products.

New Zealand has retained the premier position in the supply of
mutton and lamb to this country and it is probable that, as
compared with Australia as a whole, New Zealand is in a position
of considerable climatic advantage over Australia for the
production of mutton and lamb. When, however, one considers
certain favoured districts in Australia, such as Tasmania,
portions of Southern Victoria, the Adelaide Hills and the south-
east of South Australia and probably portions of the south of New
South Wales, one cannot avoid believing that Australia possesses
any amount of territory in which she could effectively compete
with New Zealand in mutton and lamb production. I am, of course,
aware of the serious effect which caseous lymphadenitis is having
on Australian mutton and lamb exports but this is a temporary
handicap which must be overcome. I should have thought that among
the ways in which Australia can rapidly expand her economically
profitable exports, the development of a sound trade in mutton and
lamb was one of the clearest examples.

Pig Products

I will not largely add to the length of this letter by any
detailed comment on pig products but will just remind you that the
Imperial Economic Committee will be issuing a report on Pig
Products in the course of the next two or three months. I believe
that this report will be a really valuable document and will just
tentatively suggest that the receipt of this report by the
Commonwealth Government might be made to synchronise with a move,
through the Australian Pig Industry Council, for the stimulation
of productive efficiency in regard to pork, bacon and hams.

Yours sincerely,
F. L. MCDOUGALL