Omar Bennett
Dollar diplomacy was a foreign policy created by US President William Howard Taft and his Secretary of State Philander C. Knox, which was in place from 1909 to 1913. The policy was characterized by the use of American banks and financial interests, supported by diplomats, to exert influence and expand US commercial and financial interests abroad. While it stressed peaceful intervention, military force was used when countries resisted. Dollar diplomacy was considered a failure and was cancelled by Woodrow Wilson when he became president in 1913. The term is still used negatively today, particularly in Latin America, where it is associated with the US government and corporations' use of economic, diplomatic, and military power to open up foreign markets.
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What You'll Learn
Dollar diplomacy in Latin America
Dollar diplomacy was a foreign policy created by US President William Howard Taft and his Secretary of State, Philander C. Knox, and was active from 1909 to 1913. The policy was designed to ensure the financial stability of a region while protecting and extending US commercial and financial interests there. It was a policy whereby American influence would be exerted primarily by American banks and financial interests, supported in part by diplomats.
In Latin America, dollar diplomacy was used to encourage and protect trade within the region. It was also used to justify US intervention in Central America, where it was seen as a means to protect the Panama Canal. In March 1909, President Taft attempted to establish control over Honduras by buying up its debt to British bankers. The US also urged its bankers to invest in Haiti and Honduras to prevent foreign funds from entering those countries. This set the stage for further intervention in the future, as the US felt obligated to prevent economic and political instability in the region.
Dollar diplomacy was also used to support the overthrow of José Santos Zelaya in Nicaragua and to set up Adolfo Díaz in his place. However, this led to resentment among the Nicaraguan people and eventually resulted in US military intervention.
Overall, dollar diplomacy in Latin America was seen as a failure, with Latin Americans using the term "dollar diplomacy" disparagingly to show their disapproval of the role that the US government and corporations played in using economic, diplomatic, and military power to open up foreign markets. When Woodrow Wilson became president in March 1913, he immediately canceled all support for dollar diplomacy.
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Dollar diplomacy in East Asia
Dollar diplomacy was a foreign policy created by US President William Howard Taft and his Secretary of State, Philander C. Knox, from 1909 to 1913. The policy was to ensure the financial stability of a region while expanding US commercial interests in that region. In East Asia, dollar diplomacy was specifically directed towards China. The US wanted to use its banking power to create tangible American interests in the country that would limit the scope of other powers, increase trade opportunities, and protect the Open Door policy of trading opportunities for all nations.
Taft's predecessor, Theodore Roosevelt, laid the foundation for this approach with his Roosevelt Corollary to the Monroe Doctrine, which stated that if any nation in the Western Hemisphere appeared politically and financially unstable enough to be vulnerable to European control, the United States had the right and obligation to intervene. However, Roosevelt opposed the Open Door policy in China, writing to Taft in 1910 that it could only be maintained by general diplomatic agreement. He warned that a powerful nation could easily disregard it and that the US ought not to try to bluff the Japanese on the mainland of Asia.
Taft and Knox ignored Roosevelt's policy and advice. They attempted to promulgate dollar diplomacy in China, but it was even less successful than in other regions. They failed in their goal to dislodge Japan from the Asian mainland and further heightened tensions between Japan and the US by failing to resolve the conflict between China and Japan over Manchuria. This created a deep suspicion among other powers hostile to American motives.
Dollar diplomacy was based on the false assumption that American financial interests could mobilize their potential power in East Asia. However, the American financial system was not geared towards handling international finance, and the US had to depend primarily on London. The last of the dollar diplomacy schemes came to an end when Woodrow Wilson became president in 1913 and immediately canceled all support for it.
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Dollar diplomacy's critics and supporters
Dollar diplomacy was a foreign policy created by US President William Howard Taft and his Secretary of State Philander C. Knox. It was characterized by the use of American banks and financial interests, supported by diplomats and the military, to exert influence and expand US commercial and financial interests abroad.
Supporters
Thomas A. Bailey, a professor of history at Stanford University, stated that dollar diplomacy was designed to make both people in foreign lands and American investors prosper. Taft defended his dollar diplomacy as an extension of the Monroe Doctrine, which stated that the United States would use military force to restore order, stability, and economic prosperity in other nations of the Western Hemisphere. Taft also believed that arbitration was the most viable method of settling international disputes and that his policy of "substituting dollars for bullets" would prevent wars and promote national ideals.
Critics
Critics of dollar diplomacy argue that it was a form of American imperialism, using economic, diplomatic, and military power to open up foreign markets and exert control over other countries. Latin Americans, for example, use the term "dollar diplomacy" disparagingly to show their disapproval of the role played by the US government and corporations in their region. Dollar diplomacy alienated Japan and Russia and created deep suspicion among other powers regarding American motives. It also failed to achieve its goals in several regions, including China, where it was a disaster, and Turkey, where European powers were too entrenched. The policy was renounced by several US presidents, including Woodrow Wilson, Herbert Hoover, and Franklin D. Roosevelt, who attempted to construct a "Good Neighbor Policy" in Latin America.
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Dollar diplomacy's legacy
Dollar diplomacy was a foreign policy created by US President William Howard Taft and his Secretary of State, Philander C. Knox, to ensure the financial stability of a region while protecting and extending US commercial and financial interests there. It was a policy whereby American influence would be exerted primarily by American banks and financial interests, supported in part by diplomats.
Dollar diplomacy was based on the false assumption that American financial interests could mobilize their potential power, and wanted to do so in East Asia. However, the American financial system was not geared to handle international finance, such as loans and large investments, and had to depend primarily on London. The policy was a failure everywhere, and the term is now used negatively. Dollar diplomacy alienated Japan and Russia and created deep suspicion among other powers hostile to American motives.
In Latin America, the term "dollar diplomacy" is used disparagingly to show disapproval of the role the US government and US corporations have played in using economic, diplomatic, and military power to open up foreign markets. In the long run, American businessmen did increase trade and investment in Latin America, but it was World War I, not dollar diplomacy, that decreased European economic interests in that part of the world.
Dollar diplomacy was also a failure in China, the target for the Taft-Knox policy in East Asia. The policy was even criticized by some US politicians, such as Herbert Hoover, who made it a priority to eliminate its effects, particularly in Latin America. Franklin D. Roosevelt also renounced dollar diplomacy, and both he and Hoover attempted to construct what became known as the Good Neighbor Policy in dealing with Latin America.
Despite its failures, dollar diplomacy was an important shift in US foreign policy, marking a departure from the isolationist policies of the 1800s and a new era of using military and economic power to pursue foreign policy goals. It also reflected the belief that diplomacy should be raised above partisan conflict and wholly dissociated from differences in domestic policy, with the country presenting a united front to the world.
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Dollar diplomacy's goals
Dollar diplomacy was a foreign policy created by US President William Howard Taft and his secretary of state, Philander C. Knox, to ensure the financial stability of a region while protecting and extending US commercial and financial interests there. It was a policy that encouraged and protected trade within Latin America and Asia.
The main goals of dollar diplomacy were:
- To promote American business interests abroad, especially in the Caribbean, Central America, and East Asia, by using economic power and guaranteeing loans to foreign countries.
- To create stability and order abroad, particularly in regions with shaky governments, to promote American commercial interests.
- To use private capital and American banking power to further US interests overseas, such as in China, where the US gained financially from the construction of a railway.
- To uphold economic and political stability and protect American financial interests in regions like Venezuela, Cuba, and Central America.
- To settle international disputes through arbitration and to prevent European control in the Western Hemisphere by intervening in politically and financially unstable countries.
Dollar diplomacy was not a new concept, as the use of diplomacy to promote commercial interests dates back to the early years of the American Republic. However, it was highly criticized as a form of heedless manipulation of foreign affairs for strictly monetary ends, and it failed to achieve its goals in many regions, leading to its eventual abandonment by the US government in 1912.
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Frequently asked questions
No, Dollar Diplomacy was a foreign policy created by President William Howard Taft and his Secretary of State Philander C. Knox, which was in place from 1909 to 1913. It was characterised by the use of American financial power to exert influence and establish stability in foreign nations, particularly in Central America and Asia.
The main goals of Dollar Diplomacy were to protect and expand American economic interests, promote financial stability in foreign nations, and increase trade and investment opportunities for the United States. It was also seen as a way to limit the influence of other foreign powers, particularly in regions like Latin America and East Asia.
Dollar Diplomacy is generally considered a failure, especially in regions like China and Latin America. It faced strong criticism for its aggressive use of economic and military power to open up foreign markets and its inability to achieve its goals. However, it is important to note that there were some successes, such as the prevention or ending of several wars through arbitration and the expansion of American influence in certain regions.
