Jonah Patel
Theodore Roosevelt's Big Stick foreign policy, which was based on the Roosevelt Corollary to the Monroe Doctrine, laid the foundation for Dollar Diplomacy. Roosevelt's policy, which he implemented in 1904, asserted the United States' role as the police power of the Western Hemisphere, giving it the right and obligation to intervene in nations that were politically and financially unstable and vulnerable to European control. While Roosevelt's policy was more concerned with the balance of power and improving the Anglo-American relationship, his successor, William Howard Taft, and Secretary of State Philander C. Knox, pursued Dollar Diplomacy more aggressively, particularly in Latin America and East Asia, by leveraging American economic power to guarantee loans to foreign countries and exert influence through American banks and financial interests.
| Characteristics | Values |
|---|---|
| Time Period | 1904-1913 |
| Origin | Developed by Theodore Roosevelt and laid the foundation for this approach in 1904 with his Roosevelt Corollary to the Monroe Doctrine. |
| Goal | To create stability and order abroad that would promote American commercial interests and financial stability in the region. |
| Approach | Substituting dollars for bullets, using economic power instead of military force to further American interests. |
| Region | Latin America, East Asia, and the Caribbean |
| Tactics | Guaranteeing loans to foreign countries, using private capital to further U.S. interests, and supporting American businesses overseas. |
| Outcome | Dollar diplomacy was considered a failure, creating resentment and suspicion among foreign powers and leading to the alienation of Japan and Russia in the Far East. |
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What You'll Learn
Roosevelt Corollary to the Monroe Doctrine
The Roosevelt Corollary to the Monroe Doctrine was an addition to the Monroe Doctrine articulated by President Theodore Roosevelt in his 1904 State of the Union Address. The Monroe Doctrine had warned European powers against colonizing countries in the Americas, but the Roosevelt Corollary changed this to an aggressive military "obligation" for the US to intervene in Latin and Central America to maintain stability.
The Roosevelt Corollary stated that the United States could intervene in the internal affairs of Latin American countries if they committed flagrant wrongdoings that "loosened the ties of civilized society". Roosevelt tied his policy to the Monroe Doctrine, and it was also consistent with his foreign policy, including his "big stick" ideology. In his annual message to Congress in December 1904, Roosevelt said:
> Chronic wrongdoing... may in America, as elsewhere, ultimately require intervention by some civilized nation. [...] in the Western Hemisphere, the adherence of the United States to the Monroe Doctrine may force the United States, however reluctantly, in flagrant cases of such wrongdoing or impotence, to the exercise of an international police power.
Roosevelt's Corollary justified the US intervention in Cuba, Nicaragua, Haiti, and the Dominican Republic. It also contributed to the United States' transition into a great world power after the Spanish-American War, marking the start of the US expanding its interests beyond its borders.
The Roosevelt Corollary was invoked again in 1954 by Secretary of State John Foster Dulles at the Tenth Pan-American Conference in Caracas, denouncing the intervention of Soviet communism in Guatemala. This was used to justify Operation PBSuccess, which deposed President Jacobo Árbenz and installed a military dictatorship under Carlos Castillo Armas.
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Intervention in the Dominican Republic
The foreign policy approach known as Dollar Diplomacy was created by US President William Howard Taft and his Secretary of State, Philander C. Knox. However, it was President Theodore Roosevelt who laid the foundation for this approach in 1904 with his Roosevelt Corollary to the Monroe Doctrine. This policy gave the US the right and obligation to intervene in Latin America and the Caribbean if any nation in these regions appeared politically and financially unstable enough to be vulnerable to European control. This policy was known as "Big Stick" diplomacy and was characterised by Roosevelt's use of the threat of force to coerce countries into agreements that benefited the US.
Roosevelt's peaceful intervention in the Dominican Republic is a key example of Dollar Diplomacy in action. In 1905, Roosevelt appointed Jacob Hollander, a prominent economist, to investigate the Dominican debt crisis. By December of that year, Hollander had the Dominican Republic converted to the gold standard, and by September 1906, he had fully adapted the Dominican debt into a persuasive US instrument to establish hegemony in the region. This led to the US gaining control of the Dominican Republic's customs service revenues, with US loans being exchanged for the right to choose the Dominican head of customs (the country's major revenue source).
Roosevelt saw Dollar Diplomacy as a gift to Latin America, specifically the Dominican Republic, believing that stability and order were being brought to the region through US intervention. However, this intervention caused growing resentment from neighbouring countries, who felt that the US was manipulating their internal affairs.
Dollar Diplomacy was also implemented in other countries, such as Nicaragua, where it supported the overthrow of José Santos Zelaya and established a collector of customs. It was also attempted in China, where it was less successful, and in Central American countries, where it was used to protect the Panama Canal.
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Support for expansion of American business
Theodore Roosevelt laid the foundation for dollar diplomacy in 1904 with his Roosevelt Corollary to the Monroe Doctrine. This corollary stated that the United States would intervene as a last resort to ensure that other nations in the Western Hemisphere fulfilled their obligations to international creditors and did not violate the rights of the United States. Roosevelt's Big Stick foreign policy thus set a course for the US relationship with Central and Latin America that played out over the next several decades.
Roosevelt was an expansionist and supported the American move into world affairs. He believed that expansion was necessary for the United States and would benefit the rest of the world. He viewed foreign affairs in strategic terms, with Europe as the centre of world power. He felt an affinity for Britain and based much of his diplomacy on cooperation between Washington and London. As a result, Roosevelt mediated the Russo-Japanese War (1904–1905) and the conflict between France and Germany over Morocco in 1906.
Roosevelt's peaceful intervention in the Dominican Republic, where US loans were exchanged for the right to choose the Dominican head of customs (the country's major revenue source), was another example of his support for the expansion of American business. This intervention grew into William Howard Taft's dollar diplomacy, a foreign policy created by the president 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. Dollar diplomacy was also evident in extensive US interventions in the Caribbean and Central America, especially in measures undertaken to safeguard American financial interests in the region.
In East Asia, dollar diplomacy was the policy of the Taft administration to use American banking power to create tangible American interests in China that would limit the scope of other powers, increase trade and investment opportunities for American businesses, and help maintain the Open Door policy of trading opportunities for all nations.
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Encouraging economic stability in Latin America
The term "dollar diplomacy" refers to a foreign policy approach that uses a nation's economic power, through its banks and financial interests, to achieve its aims, as opposed to relying on military force. Dollar diplomacy was employed by US President William Howard Taft and Secretary of State Philander C. Knox from 1909 to 1913. The policy was designed to encourage economic stability in Latin America and East Asia, while also protecting and advancing American commercial and financial interests in these regions.
The roots of dollar diplomacy can be traced back to the presidency of Theodore Roosevelt, who laid the groundwork for this approach with his Roosevelt Corollary to the Monroe Doctrine in 1904. Roosevelt's policy asserted that the United States had the right and obligation to intervene in Latin America and the Caribbean if any nation in these regions appeared politically and financially unstable, potentially leading to European control. This intervention could take the form of sending in US Marines or, as seen in the Dominican Republic, exchanging loans for the right to choose the country's head of customs, thereby gaining control over the nation's primary source of revenue.
In Latin America, dollar diplomacy aimed to encourage economic stability and promote American business interests. This was particularly evident in the Caribbean, where Taft and Knox believed that American investors would have a stabilizing effect on the region's shaky governments. They attempted to gain financial control in countries like Nicaragua, Honduras, and Haiti by taking over customhouses and encouraging the repayment of European debts through loans from American businessmen or multinational groups with American participation.
The policy of dollar diplomacy in Latin America faced criticism and resentment, particularly from the Nicaraguan people, which eventually led to US military intervention. Additionally, the assumption that American financial interests could be easily mobilized in East Asia proved false, as the American financial system was not well-equipped to handle international finance. The policy also created tensions with other world powers, as it restrained other countries from reaping financial gains in the region.
Overall, while dollar diplomacy sought to encourage economic stability in Latin America, it also aimed to benefit American financial interests, leading to a mixed legacy and criticism from Latin Americans, who viewed it as a form of economic and political manipulation by the US government and corporations.
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Maintaining a balance of power in Asia
In the context of maintaining a balance of power in Asia, Theodore Roosevelt's use of dollar diplomacy was a precursor to his successor William Howard Taft's foreign policy. Roosevelt's ""Big Stick"" policy was characterised by the use of military force in Latin America and the Caribbean. This policy was a precursor to dollar diplomacy, which sought to use economic power instead of military force to achieve foreign policy goals.
Roosevelt's use of dollar diplomacy in Asia was focused on maintaining a balance of power between Japan and China. In 1904, Roosevelt supported Japan's position against the massing of Russian troops along the Manchurian border. However, as Japan quickly achieved victory after victory, Roosevelt became concerned about the growth of Japanese influence and the threat it posed to American access to Chinese markets. To maintain the balance of power, he arranged for a secret peace conference between Japan and Russia in 1905, which secured peace in the region and earned him the Nobel Peace Prize.
Roosevelt also supported the Open Door policy, which aimed to keep China open to trade with all nations. He sent the Great White Fleet on manoeuvres in the western Pacific Ocean as a show of force and a message to the Japanese government about American interests in the region.
When William Howard Taft became president in 1909, he adapted Roosevelt's foreign policy philosophy to one that reflected America's growing economic power. Taft's dollar diplomacy aimed to use American economic might to promote American business interests and secure markets overseas. In Asia, Taft's policies built upon Roosevelt's efforts to maintain a balance of power between Japan and China. He attempted to bolster China's ability to withstand Japanese interference and maintain the Open Door policy by arranging international financing for railroad development in China. However, his efforts to expand American influence in Manchuria met with resistance from both Russia and Japan, exposing the limits of America's influence and understanding of the region's diplomatic complexities.
Taft's dollar diplomacy ultimately failed to maintain a balance of power in Asia. His attempts at China-Japan mediation heightened tensions between the two countries and spurred Japan to consolidate its power in the region. This set the stage for further difficulties between the United States and Japan, which would eventually explode with the outbreak of World War II.
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Frequently asked questions
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.
Roosevelt laid the foundation for Dollar Diplomacy in 1904 with his Roosevelt Corollary to the Monroe Doctrine, under which the US Marines were frequently sent to Central America. He put the US in the role of the "police power" of the Western Hemisphere and set a course for the country's relationship with Central and Latin America.
The Roosevelt Corollary stated that the US would intervene as a last resort to ensure that other nations in the Western Hemisphere fulfilled their obligations to international creditors, and did not violate the rights of the US or invite "foreign aggression to the detriment of the entire body of American nations".
Dollar Diplomacy was largely considered a failure. In the Far East, it alienated Japan and Russia and created deep suspicion among other powers. In Latin America, it was disapproved of as a way for the US government and corporations to use economic, diplomatic, and military power to open up foreign markets.
