Dear Mr. Bruce,

IMPERIAL CONFERENCE

Owing to the upheaval caused by the General Strike and to the
subsequent difficulties over the coal mining stoppage [1], it has
been impossible to make much progress in the endeavour to arouse
great interest in the coming Imperial Conference.

As soon as Parliament reassembles, I shall try to get a number of
members to agree to devote a considerable amount of time and
thought to the work of educating public opinion as to the
importance of the economic side of the Conference being made a
success.

Peterson [2] of the 'Times' tells me that he believes Mr.

Mackenzie King [3] has for some time been in personal
communication with General Hertzog [4] and with Mr. Cosgrave [5]
and he anticipates a formidable non-co-operation 'bloc' at the
Conference in consequence. If there is any truth in this
suggestion, I presume it would chiefly affect the political and
foreign relations side of the Conference. This would render all
the more necessary and desirable a successful economic side.

The difficulty about Empire economics is to induce people here to
realise that Empire Development is a burning question. Almost
everyone will agree that a policy of Empire development is
necessary but very few indeed seem to appreciate the fact that
time is important and that progress should be made at once.

However I feel sure that, in October, the country will be more
interested in Empire economics than it was three years ago.

If you feel inclined to read the original of the article which I
wrote for the Times' 'Empire Day' Number and which I am enclosing
in my other letter [6], you will see my reasons for believing that
this country is now far riper for serious consideration of the
problems of Empire economics than it was in 1923.

Although naturally no one realised it at the time, 1923 can be
regarded as the first typical post war year so far as British
trade is concerned.

In 1923 the leaders of commercial enterprise were looking for a
return to pre-war conditions; the trade returns for 1924, 1925 and
the first half of 1926 show that they were wrong and that when you
preached the necessity to Great Britain of Empire development, you
were entirely on right lines.

For the purpose of developing markets for British goods, the
expansion of population in Australia and New Zealand is more
important than any where else in the Dominions. Not only are
Australia and New Zealand the biggest per capita purchasers of
British goods, they are also the two countries in which
development could most rapidly take place. The difficulty of rapid
progress is psychological rather than economic, that is to say it
is not the economic factor but the factor of confidence which is
needed before any great forward step can be taken. In effect at
the present time Great Britain is saying to Australia and New
Zealand'Take our surplus population, develop your resources,
double your people in a short space of time and increase your own
strength and the strength of Great Britain and the whole Empire.'-
Australia and New Zealand make two forms of answer.

Officially the answer is-'Yes we realise all that but what about
markets for our exports of primary produce?' Unofficially
Australia and New Zealand say-'Why should we speed up our
development? We are going ahead, look at our record; we are taking
some of your people but you send us some curious material. If we
speed up our reception of migrants and our general development,
can we maintain our standard of living? Your financial pundits are
continuously warning us against over borrowing apparently not
realising that we cannot develop without money'.

I suggest that the above does in a way summarise the situation as
between Great Britain and Australia and New Zealand.

If it should prove possible to arouse deep interest in the
Conference during the next three months, it may also be possible
that the British Government will give the problems of Empire
development greater consideration before the Conference.

I imagine that a most useful purpose would be served if Mr.

Baldwin [7] clearly stated the position of British industry and
showed the paramount need for markets for British goods; if he
emphasized Great Britain's dependence upon the Overseas Empire for
the future years and pointed out the Empire's dependence upon
Great Britain for markets for produce. for defence, and for
finance.

I should like to see Mr. Baldwin thus appeal to the Dominions for
a policy of accelerated development but to support his appeal with
a clear statement that showed that he realised the difficulties in
the way and that he invited the Dominions to accept the full co-
operation of Great Britain in developmental problems.

Great Britain might thus say to the Dominions but especially to
Australia and New Zealand-'If you will consent to a policy of
accelerated development we, on our part, will undertake to
underwrite a large share of any risk which the adoption of such a
policy may involve. We will share the financial risk and we will
guarantee to take whatever action may ultimately become necessary
to give you a better position than foreign countries in our
markets for your primary produce. Today we are putting into effect
the Imperial Economic Committee's recommendations for a system of
voluntary preference. That may be a success. If, in two years, it
is not having marked effect, we will undertake to put into effect
other methods to achieve this objective; and we guarantee to use
the next two years to educate the country to realise what Empire
development means'.

If the Imperial Conference approaches economic problems in a
businesslike way, it is obvious that it would be most useful if
Australia was prepared with a number of concrete schemes, in which
British co-operation could be usefully applied. For instance:

1. Unification of the railway gauges.

2. Feeder railways to the Main Lines.

3. North-South line and Territory railway development.

4. Development of large schemes for the utilization of the Murray
country, the fattening of stock, fodder reserve etc.

5. Development of coastal areas by soil improvement to allow of
intensive settlement.

These are a few of the many possible large schemes which could be
prepared in advance with the idea of some definite form of British
co-operation.

I understand from Mr. Oscar Thompson, of the Aberdeen White Star
Line and of the Overseas Settlement Committee, that Mr.

Christopher Turnor [8] is anxious to secure you at his country
place for your first week-end in England and to invite Mr. Amery
[9] and half a dozen other people who matter to meet you to
discuss, before the formal conference starts, the problems of
Empire Trade and Empire Migration. Mr. Thompson has asked Mr. John
Sanderson [10] to communicate with you about this. If you are able
to accept this invitation, a discussion of practicable schemes
would be of very great use and interest.

As I see it, the big questions that must be faced, so far as
Australia and New Zealand are concerned, are two:

1 (a) To what extent can Great Britain give pledges to underwrite,
at least in part, the financial and marketing risks of accelerated
development in Australia and New Zealand.

1 (b) How far, in the light of recent history, will these pledges
inspire confidence overseas?
2 How far can the Governments of Australia and New Zealand induce
their people to agree to a policy of accelerated development?

CROWN COLONIES

Apart from Australia and New Zealand, the recent history of West
and East African Development is probably the most pleasing record
of progress within the Empire. The importance of this development
to Great Britain can readily be seen by reference to the following
figures extracted from the last Board of Trade journal:

Percentage of British Produce and manufactures taken by various
countries

1913 Year ending Year ending
March 1925 March 1926
Australia and New Zealand 8.5% 10.9% 11.7%
West Africa 1.2% 1.5% 2.0%
East Africa .5% .8% 1 1.0%

The latest trade returns also show how the African Crown Colonies
are increasing as markets for British goods. These returns cover
the first quarter of 1924, 1925 and 1926.

Exports of British Produce and manufactures for quarter ending
March 31st

1924 1925 1926
West Africa 2,099,000 3,275,000 3,718,000
East Africa 732,000 1,272,000 1,442,000

You will realise how striking a story of progress these figures
show. I am hoping that one result of the Imperial Conference will
be that the Dominions will commence to take an active interest in
the progress and development of the Crown Colonies.

Yours sincerely,
F. L. MCDOUGALL