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Dollar diplomacy is a foreign policy implemented by US President William Taft at the beginning of the 20th century, which consisted of consolidating the power of the United States in other countries through financial investments.
Dollar diplomacy background
Since the beginning of the United States as a republic, the different American governments have been governed by what is known as the Monroe Doctrine. This was a foreign policy that opposed European colonialism and emerged in 1823, during the government of James Monroe (1758-1831), who was the 5th president of the United States, and ruled from 1817 to 1825. Basically, the Monroe Doctrine it recognized the sovereignty of the United States with respect to Europe; it accepted that the country would not intervene in the existing European colonies in Western countries; it established that no other nation could create a new colony in the West and that if a European nation tried to control or interfere in the West, the United States would consider it a hostile action against it.
This doctrine laid the foundation for future United States policies. In fact, prior to dollar diplomacy, other policies emerged that contributed to increasing the political, economic, and diplomatic power of the United States. Mainly, during the two terms of Theodore Roosevelt (1858-1919), who was one of the most important progressive presidents in the country.
The political and economic context of the United States at the beginning of the 20th century
In 1899, in the Spanish-American War, the United States took control of the former Spanish colonies of Puerto Rico and the Philippines; and, beginning with the Roosevelt administration in 1901, the United States abandoned the policies it had pursued for the previous century. This stage was characterized by a great military and economic growth of the country, which was reflected in its foreign policy and in the expansion of its power in Latin America.
Theodore Roosevelt’s politics
In 1904, Roosevelt made his own interpretation of the Monroe Doctrine. This is how the Roosevelt corollary arose, which was a kind of amendment to said doctrine, where it established that if a European country threatened or put the rights, properties or companies of the United States at risk, then the United States would be forced to intervene in retaliation.
Leaning on the corollary that gave him carte blanche to interfere in American countries as international police, Roosevelt put into practice some of the foreign policies that favored the positioning of the United States as a world power and its control of America through its military power. One of them was the famous policy of the Big Stick, synthesized in a phrase by Roosevelt, based on an African proverb: “he speaks softly and carries a big stick: so you will go far.”
In this way, during the Roosevelt government, between 1901 and 1909, the army was granted greater power, especially as a support for diplomatic relations and as a defense of state interests.
As the power of the United States was consolidated in the Americas, other countries on the continent found themselves experiencing periods of political, social, and economic instability. Some of them, such as Nicaragua, the Dominican Republic and Mexico, contracted large debts with European countries.
William Taft and the origin of dollar diplomacy
In 1909, William Howard Taft (1857-1930) took office as President of the United States. Taft was the country’s 27th president, ruling from 1909 to 1913. Despite winning thanks to Roosevelt’s support, Taft sided with conservatives and pursued a different foreign policy than his predecessor.
The Taft government was notable for focusing on using the country’s economic power as a way to improve its global position and expand into other markets. At that time it was already evident that several American countries could not pay their debts to Europe. With the objective of reaffirming the power of the United States in America and avoiding the intervention of European countries in the American continent, Taft and his Secretary of State, Philander C. Knox, introduced what is known as dollar diplomacy.
What is dollar diplomacy
Dollar diplomacy was, therefore, part of the US foreign policy promoted during the Taft administration, to achieve financial stability in Latin American countries, expand commercial interests in those countries, and reinforce US dominance in strategic sites in America and the Far East.
In 1912, Taft described dollar diplomacy as a way to “replace bullets with dollars.” In this way, dollar diplomacy sought to minimize the use of military forces and, instead, use the economic power of the country to strengthen its commercial relations.
With this diplomatic policy, Taft intended to buy the debts of Latin American countries and, in exchange, obtain control over them through different investments. Some of these investments were the purchase of railways, the creation of banks and American companies, among others.
The implementation of dollar diplomacy
Dollar diplomacy was carried out through different methods. These included:
- The purchase of pre-existing debts of debtor countries.
- The granting of loans to said countries.
- The purchase of state services, such as the railway.
- Investments in state projects.
- Support for insurgents or revolutionaries opposed to the current government of the debtor countries.
- The use of the army to counteract opposition to the United States intervention and control debtor countries.
Dollar diplomacy in the Far East
At the beginning of his government, Taft tried to improve commercial relations with China, helping this country to obtain international loans to expand its railway system. He also tried to support China in the face of Japan’s military buildup. However, dollar diplomacy failed when the United States tried to establish its companies in Chinese territories in the Manchuria region, which were under the rule of Japan and Russia.
Dollar diplomacy in Latin America
Dollar diplomacy was applied in several Latin American countries. Some of them were:
- Panama : In 1904 the construction of the Panama Canal began. In order to control it, the United States carried out several interventions in this country. He supported a revolution that resulted in a new Panamanian government that favored the presence and operations of the United States in the canal.
- Dominican Republic – In 1904, the Dominican Republic was unable to repay the loans it had received from some European countries.
- Nicaragua : something similar happened in Nicaragua, where President Adolfo Díaz, an ally of the United States, ruled. In the midst of a great social and economic crisis, an insurgent movement led by Luis Mena appeared, which tried to overthrow the government. Due to Nicaragua’s geopolitical importance and in order to prevent other countries from interfering in this country’s conflicts, the United States decided to apply dollar diplomacy. However, the Nicaraguan people resisted US intervention in their financial affairs and revolts to overthrow the president continued. The United States abandoned diplomacy and put down the revolution by deploying the full power of its army. Later, he established his base in Nicaragua to “stabilize” and “reorganize” the government.
- Honduras – In 1909, Taft tried unsuccessfully to control Honduras by buying the debt this country owed to British bankers.
- Mexico: In 1910, the Mexican Revolution took place. This event occurred in the first year of Taft’s presidency and was viewed by the United States as a threat to his business interests, so it began to implement Roosevelt’s Big Stick and dollar diplomacy policies. When, in 1912, Mexico tried to sell land in the Mexican state of Baja California to some Japanese companies, the United States opposed it and approved the Lodge Corollary, another amendment to the Monroe Doctrine, promoted by United States Senator Henry Cabot Lodge. In this new corollary, the United States maintained that no foreign company could acquire a certain amount of territory in the Western Hemisphere that would allow it to have control of that area. This statement by the United States prevented Mexico from carrying out its plans.
Consequences of dollar diplomacy
Dollar diplomacy was and still is quite controversial. Although supposedly at first it was intended to become something advantageous for all the countries involved, in reality, the application of this policy was only beneficial for the United States.
While dollar diplomacy arguably was unsuccessful in China, this policy increased tension between China and neighboring Japan. It also caused a strong impact in some Latin American countries.
In Latin America, the United States managed to impose itself and establish itself, especially in countries like the Dominican Republic, Nicaragua and Panama; not only could it not prevent economic instability, but it also worsened the political situation in the affected countries. His interference led to several riots, more crises, social problems, and increased poverty. This also caused great resentment in the Central American countries and resulted in the rise of nationalist movements that opposed the United States.
Despite the benefits that the United States obtained, during the Taft government it was evident that dollar diplomacy was a failure, considering its original purpose, which was to establish diplomatic and commercial relations.
Beginning in 1913, Taft’s successor, the 28th US president, Woodrow Wilson, replaced dollar diplomacy with his “moral diplomacy,” which relied on offering US support only to countries that shared its common interests. same ideals.
Dollar diplomacy today
Although dollar diplomacy is still in force today, it is generally considered a negative practice that threatens the sovereignty of current states.
Even the term dollar diplomacy is often used in a pejorative way to refer to the intervention of the United States in the political and economic affairs of other countries.
Sources
- Gobat, Michel (2009). The construction of a neo-colonial state: the Nicaraguan encounter with dollar diplomacy. Icons. Social Sciences Magazine, (34), 53-65. [Consultation date May 1, 2022]. ISSN: 1390-1249. Available here .
- Choices Program. (2021, September 29). What was the US “dollar diplomacy” policy? Youtube. Available here .
- History. (2018, May 7). Here’s Why President Taft’s Dollar Diplomacy Was a Failure. Youtube. Available here .
