Dollar Diplomacy
Encyclopedia
Dollar Diplomacy is a term used to describe the effort of the United States
—particularly under President William Howard Taft
—to further its aims in Latin America
and East Asia
through use of its economic power by guaranteeing loans made to foreign countries. The term was originally coined by President Theodore Roosevelt
. It was also used in Liberia
, where American loans were given in 1913. It was then known as a dollar diplomacy because of the money that made it possible to pay soldiers without having to fight; most would agree it was a considerably meager wage.
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.
laid the foundation for this approach in 1904 with his Roosevelt Corollary
to the Monroe Doctrine
(under which United States Marines
were frequently sent to Central America
) maintaining that if any nation in the Western Hemisphere appeared politically and financially 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, Secretary of State
Philander C. 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.
—
, 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.
Dollar Diplomacy, known as “[a] policy aimed at furthering the interests of the United States abroad by encouraging the investment of U.S. capital in foreign countries,” was initiated by President William Taft. The United States felt obligated, through the Dollar Diplomacy, to uphold economic and political stability. Taft’s Dollar Diplomacy not only allowed the United States to gain financially from countries, but also resisted other foreign countries from reaping any sort of financial gain. Consequently, when the United States benefited from other countries, other world powers could not reap those same benefits.
“Taft maintained an activist approach to foreign policy. On one hand, he was the initiator of what became known as Dollar Diplomacy, in which the United States used its military might to promote American business interests abroad. Taft defended his Dollar Diplomacy as an extension of the Monroe Doctrine. Taft was a major supporter of arbitration as the most viable method of settling international disputes” (MultiEducator, Inc.). Quickly becoming a world power, America sought to further her influence abroad. President Taft realized that by instituting Dollar Diplomacy, it would be pernicious to the financial gain of other countries. Thus the United States would benefit greatly.
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
—particularly under President William Howard Taft
William Howard Taft
William Howard Taft was the 27th President of the United States and later the tenth Chief Justice of the United States...
—to further its aims in Latin America
Latin America
Latin America is a region of the Americas where Romance languages – particularly Spanish and Portuguese, and variably French – are primarily spoken. Latin America has an area of approximately 21,069,500 km² , almost 3.9% of the Earth's surface or 14.1% of its land surface area...
and East Asia
East Asia
East Asia or Eastern Asia is a subregion of Asia that can be defined in either geographical or cultural terms...
through use of its economic power by guaranteeing loans made to foreign countries. The term was originally coined by President Theodore Roosevelt
Theodore Roosevelt
Theodore "Teddy" Roosevelt was the 26th President of the United States . He is noted for his exuberant personality, range of interests and achievements, and his leadership of the Progressive Movement, as well as his "cowboy" persona and robust masculinity...
. It was also used in Liberia
Liberia
Liberia , officially the Republic of Liberia, is a country in West Africa. It is bordered by Sierra Leone on the west, Guinea on the north and Côte d'Ivoire on the east. Liberia's coastline is composed of mostly mangrove forests while the more sparsely populated inland consists of forests that open...
, where American loans were given in 1913. It was then known as a dollar diplomacy because of the money that made it possible to pay soldiers without having to fight; most would agree it was a considerably meager wage.
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.
"Dollar Diplomacy" in the Americas
The outgoing President Theodore RooseveltTheodore Roosevelt
Theodore "Teddy" Roosevelt was the 26th President of the United States . He is noted for his exuberant personality, range of interests and achievements, and his leadership of the Progressive Movement, as well as his "cowboy" persona and robust masculinity...
laid the foundation for this approach in 1904 with his Roosevelt Corollary
Roosevelt Corollary
-Background:In late 1902, Britain, Germany, and Italy implemented a naval blockade of several months against Venezuela because of President Cipriano Castro's refusal to pay foreign debts and damages suffered by European citizens in a recent Venezuelan civil war. The incident was called the...
to the Monroe Doctrine
Monroe Doctrine
The Monroe Doctrine is a policy of the United States introduced on December 2, 1823. It stated that further efforts by European nations to colonize land or interfere with states in North or South America would be viewed as acts of aggression requiring U.S. intervention...
(under which United States Marines
United States Marine Corps
The United States Marine Corps is a branch of the United States Armed Forces responsible for providing power projection from the sea, using the mobility of the United States Navy to deliver combined-arms task forces rapidly. It is one of seven uniformed services of the United States...
were frequently sent to Central America
Central America
Central America is the central geographic region of the Americas. It is the southernmost, isthmian portion of the North American continent, which connects with South America on the southeast. When considered part of the unified continental model, it is considered a subcontinent...
) maintaining that if any nation in the Western Hemisphere appeared politically and financially 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
Panama Canal
The Panama Canal is a ship canal in Panama that joins the Atlantic Ocean and the Pacific Ocean and is a key conduit for international maritime trade. Built from 1904 to 1914, the canal has seen annual traffic rise from about 1,000 ships early on to 14,702 vessels measuring a total of 309.6...
. In 1909, he attempted unsuccessfully to establish control over Honduras
Honduras
Honduras is a republic in Central America. It was previously known as Spanish Honduras to differentiate it from British Honduras, which became the modern-day state of Belize...
by buying up its debt to British bankers.
Dollar Diplomacy was not always peaceful. In Nicaragua
Nicaragua
Nicaragua is the largest country in the Central American American isthmus, bordered by Honduras to the north and Costa Rica to the south. The country is situated between 11 and 14 degrees north of the Equator in the Northern Hemisphere, which places it entirely within the tropics. The Pacific Ocean...
, 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, Secretary of State
United States Secretary of State
The United States Secretary of State is the head of the United States Department of State, concerned with foreign affairs. The Secretary is a member of the Cabinet and the highest-ranking cabinet secretary both in line of succession and order of precedence...
Philander C. Knox
Philander C. Knox
Philander Chase Knox was an American lawyer and politician who served as United States Attorney General , a Senator from Pennsylvania and Secretary of State ....
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
Haiti
Haiti , officially the Republic of Haiti , is a Caribbean country. It occupies the western, smaller portion of the island of Hispaniola, in the Greater Antillean archipelago, which it shares with the Dominican Republic. Ayiti was the indigenous Taíno or Amerindian name for the island...
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.
—
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 Cuba and Central America, especially in measures undertaken to safeguard American financial interests and from the United States government in the region. In ChinaChina
Chinese civilization may refer to:* China for more general discussion of the country.* Chinese culture* Greater China, the transnational community of ethnic Chinese.* History of China* Sinosphere, the area historically affected by Chinese culture...
, 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.
Dollar Diplomacy, known as “[a] policy aimed at furthering the interests of the United States abroad by encouraging the investment of U.S. capital in foreign countries,” was initiated by President William Taft. The United States felt obligated, through the Dollar Diplomacy, to uphold economic and political stability. Taft’s Dollar Diplomacy not only allowed the United States to gain financially from countries, but also resisted other foreign countries from reaping any sort of financial gain. Consequently, when the United States benefited from other countries, other world powers could not reap those same benefits.
“Taft maintained an activist approach to foreign policy. On one hand, he was the initiator of what became known as Dollar Diplomacy, in which the United States used its military might to promote American business interests abroad. Taft defended his Dollar Diplomacy as an extension of the Monroe Doctrine. Taft was a major supporter of arbitration as the most viable method of settling international disputes” (MultiEducator, Inc.). Quickly becoming a world power, America sought to further her influence abroad. President Taft realized that by instituting Dollar Diplomacy, it would be pernicious to the financial gain of other countries. Thus the United States would benefit greatly.