Dollar Diplomacy

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Dollar Diplomacy is the term used to describe the efforts of the United States — particularly under President William Howard Taft — to further its foreign policy aims in Latin America and East Asia through use of its economic power by guaranteeing loans made to foreign countries.[1] The term was originally coined by President Taft, who claimed that U.S. operations in Latin America went from "warlike and political" to "peaceful and economic". It was also used in Liberia, where American loans were given in 1913.

The term is also used historically by Latin Americans to show their disapproval of the role that the U.S. government and U.S. corporations have played in using economic, diplomatic and military power to open up foreign markets.

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[edit] "Dollar Diplomacy" in the Americas

The outgoing President Theodore Roosevelt laid the groundwork for this approach in 1904 with his Roosevelt Corollary to the Monroe Doctrine (under which U.S. Marines were frequently sent to Central America) maintaining that if any nation in the Western Hemisphere appeared politically and fiscally so unstable as to be vulnerable to European control, the United States had the right and obligation to intervene.

Taft continued and expanded the policy, starting in Central America, where he justified it as a means of protecting the Panama Canal. In 1909, he attempted unsuccessfully to establish control over Honduras by buying up its debt to British bankers. Dollar Diplomacy was not always peaceful. In Nicaragua, U.S. "intervention involved participating in the overthrow of one government and the military support" of another. When a revolt broke out in Nicaragua in 1912, the Taft administration quickly sided with the insurgents (who had been instigated by U.S. mining interests) and sent U.S. troops into the country to seize the customs houses. As soon as the U.S. consolidated control over the country, Knox encouraged U.S. bankers to move into the country and offer substantial loans to the new regime, thus increasing U.S. financial leverage over the country. Within two years, however, the new pro-U.S. regime faced a revolt of its own; and, once again, the administration landed U.S. troops in Nicaragua, this time to protect the tottering, corrupt U.S. regime. U.S. troops remained there for over a decade.

Another dangerous new trouble spot was the revolution-riddled Caribbean—now largely dominated by U.S. interests. Hoping to head off trouble, Washington urged U.S. bankers to pump dollars into the financial vacuum in Honduras and Haiti to keep out foreign funds. The United States would not permit foreign nations to intervene, and consequently felt obligated to prevent economic and political instability. The State Department persuaded four U.S. banks to refinance Haiti's national debt, setting the stage for further intervention in the future.

[edit] "Dollar Diplomacy" in East Asia

The Taft-Knox foreign policy faced its most severe test, and encountered its greatest failure, in East Asia. Ignoring Roosevelt's tacit 1905 agreement with Japan to limit U.S. involvement in Manchuria, the new administration succumbed to the persuasive powers of U.S. bankers and began to move aggressively to increase U.S. economic influence in the region.

When British, French, and German bankers formed a consortium to finance a vast system of railroads in China, Knox became convinced in 1910 that the United States' free access to trade there was threatened by European financing of the new Hukuang Railroad. Knox insisted that the U.S. also participate. In 1911 the Europeans finally agreed to include the U.S. in their venture. The Taft administration arranged for U.S. bankers to be included in the project and then prevailed on J. Pierpont Morgan to create a U.S. syndicate for the purpose.

Knox was also concerned about Russian and Japanese railroad activities in Manchuria. Just as the Europeans were finally agreeing to include the U.S. in their Hukuang Railroad venture, Knox proposed that an international syndicate purchase outright—as opposed to merely provide financing for—the South Manchurian Railroad to remove it from Japanese control and managed to persuade U.S. bankers to join a six-power consortium that would give China money instead.

Both Japan and Tsarist Russia, unwilling to be jockeyed out of their dominant position, bluntly rejected Knox's overtures. Japan responded by signing a friendship treaty with Russia—a warning to the Europeans—and the entire railroad project quickly collapsed. Having attempted to expand its influence in East Asia, the U.S. now found Manchuria cordoned off from U.S. imperialism. Taft was showered with ridicule.

[edit] Repudiation by President Wilson

The Taft-Knox approach to foreign policy was repudiated by President Woodrow Wilson within a few weeks of his inauguration in 1913. Although he did not abstain from Caribbean intervention, dollar diplomacy was no longer an explicit U.S. national policy.

[edit] Complete Overview

From 1909 to 1913, President William Howard Taft and Secretary of State Philander C. Knox followed a foreign policy characterized as "dollar diplomacy." Taft shared the view held by Knox (a corporate lawyer who had founded the giant conglomerate U.S. Steel) that the goal of diplomacy should be to create stability abroad, and through this stability promote American commercial interests. Knox felt that not only was the goal of diplomacy to improve financial opportunities, but also to use private capital to further U.S. interests overseas. "Dollar diplomacy" was evident in extensive U.S. interventions in the Caribbean and Central America, especially in measures undertaken to safeguard American financial interests in the region. In China, Knox secured the entry of an American banking conglomerate, headed by J.P. Morgan, into a European-financed consortium financing the construction of a railway from Huguang to Canton. In spite of successes, "dollar diplomacy" failed to counteract economic instability and the tide of revolution in places like Mexico, the Dominican Republic, Nicaragua, and China.

[edit] See also

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[edit] Notes & References

  1. ^ The Americans History by Winthrop D. Jordan, Miriam Greenblatt , and John S. Bowes

<http://www.state.gov/r/pa/ho/time/ip/16324.htm>.

The dollar diplomacy was adopted by the United States in their atempt to colonize the Southern American States