dollar diplomacy definition us history

dollar diplomacy definition us history

Exploring the Significance of Dollar Diplomacy in U.S. History

1. Introduction to Dollar Diplomacy

Dollar diplomacy was primarily aimed at the remaking of relationships and economies in the Western Hemisphere. The United States had more economic and military influence than any other power and the Caribbean and Central American countries were “ripe” for commercial exploitation. Traditional diplomats did not possess sufficient authority to support U.S. companies in the countries in which the companies wanted to do business. Traditional concepts of gunboat diplomacy, a foreign policy that is supported by military force, would be replaced by dollars of investment and the bonds of financial obligations. At a time when Britain had huge overseas investments and was trying to maintain relative peace through her own gunboat diplomacy, the United States possessed over 200,000 troops and a war chest of $250 million. As such, U.S. military expenditure outweighed the non-European world’s insurance claims by 500 per cent, as U.S. diplomacy paid a great deal of attention to the “wants” of any nation that the United States desired to be crowned beneficiary. On March 3, 1909, President William Howard Taft said that “Dollar diplomacy is an announcement to the world America’s faith in the future of American business. In the words of the 1880s radical social thinker Henry George, “the day when we will be reasoning with arms and not with money is happily over.” U.S. policy was driven by the “desire for material advancement in the world market.” U.S. commercial interests craved commercial investments and the U.S. dollar would become the “great equalizer.”

The concept of dollar diplomacy emanated in 1958 when United States Secretary of State Philander Knox gathered a group of businessmen in the State Department with the intention of increasing U.S. influence abroad. In the broader context, dollar diplomacy has represented economic penetration versus military aggression. Nation-state diplomacy serves to protect the financial and manufacturing interests of the nation. If traditional diplomacy or protection was not forthcoming, then dollar diplomacy could provide the necessary protection. The United States looked to assert its growing industrial and financial power into the Caribbean and Central American area. By using the might of the dollar, the underdeveloped parts of Latin America could be developed and hence reduce the risk of revolutions. In isolation dollar diplomacy prospered, yet in a new age of globalization, it appeared as an outdated methodology for U.S. commerce.

2. Origins and Development of Dollar Diplomacy

Is it feasible to associate these influences with the history of U.S. dollar diplomacy and how weighty is it? Given that scholarship has hitherto focused on the U.S.’s territorial expansion, what might archetype patrons, patterns, or players of Dollar Diplomacy be and where might pertinent documentation be? The term ‘Dollar Diplomacy’ has been applied disparagingly to early twentieth-century U.S. foreign policy in Latin America. President William Howard Taft’s administration is identified with it. Admiral of the Navy George Dewey, an outstanding U.S. official and huge public figure from the late nineteenth century, opened new relationships with Cuba, the Far East, and the Pacific world. By the latter part of the nineteenth century, national banknotes and Chicago checks were circulating in London sovereign bond markets. U.S. banks and financiers, who backed U.S. foreign policy during this policy epoch, were able to do so because they had developed strong capital positions and points of fiscal privilege within U.S. borders in the wake of the Civil War and up to the end of the nineteenth century. U.S. financial interests on Wall Street and the City of London were well parse in these deep and liquid U.S. and London sterling-denominated capital markets. They failed to show the existence of Dollar Diplomacy. They were produced during an apolitical, pragmatic research door, using old and recent histories.

Ideally, the import of Dollar Diplomacy in U.S. history is a subject for empirical investigation, involving detailed examination of the interests, issues, and actors at the time. In practice, the evidence does not lend itself to straightforward hypothesis tests, quantifications, or original research. Economic, financial, and diplomatic aspects of Dollar Diplomacy are evident. The economic side showcases the role of U.S. banks, while the financial side reflects the effect of U.S. bank finance on sovereign bond markets. The diplomatic side illuminates how U.S. diplomacy shaped markets: promoted peace; protected U.S. security, trade and investment interests; and supported U.S. nationals abroad. Taken separately, not all disclosures signify Dollar Diplomacy. Diplomacy is inherent in U.S. history. Banks have often been involved and the United States has had influence on global capital markets for over 150 years, but there is no synthesis that unifies features of banks, bond markets, and international relations attributed to Dollar Diplomacy. The significant distinction of Dollar Diplomacy is that it is the U.S. Government specifically using U.S. banks to promote U.S. foreign policy, simultaneously addressing U.S. national security interests, promoting U.S. trade and investment, and shaping international sovereign bond markets.

3. Key Players and Policies in Dollar Diplomacy

Available research literature from economics, political science, history, and international law frequently condemns the relations of government with business because of a supposed inherent conflict between the specific interests of businessmen and the general interests of the nation as a political entity. This national interest is said to include the promotion of development in underdeveloped areas, the prevention or resolution of conflicts which might lead to war, and the maintenance of peace in the existing international order. However, it is both unviable and undesirable for business leaders to give up their search for government support or their involvement in public affairs. Because of the economic ties that exist among the world’s nations, an open, competitive, and private enterprise economy operating for an international market can hardly be left to the operation of impersonal and bureaucratic rules.

Rich business leaders played a significant role in shaping the policies associated with dollar diplomacy, and many of them were rewarded with choice ambassadorial appointments during the Taft years. Some of these ambassadors became the major practitioners of dollar diplomacy, agreeing to safeguard American commercial interests by inflating the United States into foreign economies or by making loans to foreign governments. Roosevelt himself remained a powerful influence in American policymaking during Taft’s tenure in the White House. His missionary-like responsibility to guide less civilized nations toward proper development gave credence to those who say dollar diplomacy was nothing more than foreign policy as an extension of imperialistic economic practice.

4. Impact and Legacy of Dollar Diplomacy

Roosevelt handled foreign trade the same way. He used the Bureau of Corporations and the State Department to gather specific information and estimates of the prospects for American business abroad. He began contributing American bankers and businessmen together who generally feared that they had been shut out of foreign investment opportunities. The regular and specialized diabetics chapters offer plenty of clues about the general state of the Wilson to Taft shift in the nature of US economic planning. Today diplomatic support for export guarantees and recourse to economic factors in diplomacy are so much taken for granted that we find it difficult to see their importance. The United States at the turn of the century still rotated on an agriculture called action by the State Department. By 1913 the Secretary of State spoke more of concern with the business problems of the larger part of the country. This sense of identification with peacekeeping promises, so important in measure as esteem and others, straightforwardly in terms of nature or size of the long-term disadvantage of returning to China the customary rates generally its neutral obligations, than in civilian terms, contributed to the dollar diplomacy’s lack of popularity.

Dollar diplomacy teased moralism, a concern for public opinion and presidential power, widened economic aspirations, and political concerns beyond military security. One could add several other distinctions that make Roosevelt and Taft look more progressive in their diplomacy than any of their predecessors. We have moved beyond the latter nineteenth century assumption that the United States was simply one more great power engaged in the same unchanging game of power politics as the rest. The Tariff Act of 1909 established a Consumer Interest Division in the State Department, the first official domestic agency for handling the overflow from foreign commercial policy, and it would be full.