This failure of dollar diplomacy exposed the limitations of the U. Still plagued by foreign debt, the Central American countries came to resent U. Aware of the failure of the dollar diplomacy, the Taft administration had abandoned it by the time President Woodrow Wilson , took office in March While he attempted to maintain U. Actively scan device characteristics for identification.
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Show Summary Details Overview dollar diplomacy. Subjects: History. Reference entries Dollar Diplomacy. All rights reserved. But locating commercial opportunities abroad was not enough for Knox and Taft. As the memorandum indicated, the United States would insist that Americans compete with Europeans in the developing countries by buying bonds, floating loans, building railroads, and establishing banks.
So it was that the State Department during the Taft years turned to dollar diplomacy. The policy gained support throughout the diplomatic corps, a fact that was especially important as Knox concentrated on policy and allowed subordinates to run day-to-day operations.
Francis M. Huntington Wilson, first assistant secretary of state, presided over the daily activities of the State Department and carried out a reorganization of the department into geographical bureaus. Huntington Wilson, Willard D. Straight, and Thomas C. Dawson, the latter two the initial heads of the Division of Far Eastern Affairs and the newly created Latin American Division, respectively, all shared the views of Taft and Knox on trade and investment.
When the administration talked about dollar diplomacy in Latin America, it was almost always referring to the Caribbean, which had strategic implications because of the soon-to-be-completed Panama Canal. Concerned over the general instability of the Central American governments, Taft and Knox set a goal of stable governments and prevention of financial collapse. Fiscal intervention would make military intervention unnecessary.
As Knox told an audience at the University of Pennsylvania on 15 June "True stability is best established not by military, but by economic and social forces….
The problem of good government is inextricably interwoven with that of economic prosperity and sound finance; financial stability contributes perhaps more than any other one factor to political stability. Such statements did not mean that Taft and Knox were unwilling to use military power in the Caribbean. They did use it. They thought that fiscal control would lessen the need for intervention. They believed that the United States and nations of the Caribbean would both benefit.
For the United States, an increase in trade, more profitable investments, and a secure Panama Canal would result. For the local inhabitants, the benefits would be peace, prosperity, and improved social conditions.
Taft and Knox believed that the way to control the finances of the Caribbean countries was to take over customhouses, following the example of the Roosevelt administration in the Dominican Republic. According to the Taft-Knox doctrine, it was important to get the Caribbean nations to repay European debts by means of loans from American businessmen or at least from multinational groups in which Americans participated. The State Department believed that these sorts of reforms would end political instability in the Caribbean.
Nicaragua proved the classic case of dollar diplomacy in the Caribbean. While the American economic interest in Nicaragua was small, the country had been an alternate route for the trans-Isthmian canal. The United States was sensitive to activities in Nicaragua.
In cooperation with Mexico, the United States also sent warships to stop Zelaya from filibustering in Central America. In October the situation became complex with the outbreak of civil war in Nicaragua. Insurgency centered on the eastern coast in Bluefields, a city dominated by foreign businessmen and planters. These foreigners and conservative politicians in Nicaragua followed the lead of General Juan J.
Foreign money, some of it American, bankrolled the revolutionaries. While declaring itself neutral, there was little question as to which side the U. Formal neutrality disappeared when Zelaya executed two Americans captured while fighting with the rebels. The United States broke off relations, asserting that the revolutionaries represented "the ideals and the will of a majority of the Nicaraguan people more faithfully than does the Government of President Zelaya.
Washington made known that Zelaya's resignation in late was not enough. Huntington Wilson pushed for expulsion of the liberal party from power, hoping the rebels would take control.
Successes followed for the insurgents, and by the end of August they had taken the capital, Managua. The United States expected fiscal reform in Nicaragua, and refused to recognize the new government until it had agreed to American control of the customhouses and to the refunding of the debt owed to British bankers by means of a loan from American financiers.
Dawson went to Nicaragua to negotiate the terms of recognition. This did not end the difficulties, for the American demands were unpopular. The United States went ahead with its financial program, even though the Senate delayed action on the treaty known as the Knox-Castrillo Convention worked out between Washington and Managua in June , which called for refunding of Nicaragua's internal and external debts and administration of the customs by a collector approved by American officials.
While the Senate debated, bankers went ahead with the rehabilitation of Nicaraguan finances, making a loan with the national railroad and the national bank as collateral. American citizens also began to collect Nicaraguan customs and to serve on a mixed claims commission, all in anticipation of Senate action. Much to the distress of Taft and Knox, the treaty died in a Senate committee in May , along with a similar treaty with Honduras. Another revolution broke out in Nicaragua in July , and this also brought American intervention.
Approximately 2, marines landed to protect U. Although the majority of the marines was soon withdrawn, a legation guard remained as a symbol of intervention until The Taft administration went out of office in March , convinced that the policy it had followed in Nicaragua was correct. Intervention had proved necessary, the administration admitted, but it was only for a short time and continued fiscal intervention would make further military intervention unlikely.
The Taft-Knox policy toward Nicaragua, and for that matter toward the rest of Central America, was unquestionably offensive to Latin Americans. Even a goodwill visit through the Caribbean by Knox could not overcome suspicions. Knox said the United States did not covet an inch of Latin territory, but such utterances were not accepted south of the Rio Grande.
Elihu Root believed that dollar diplomacy rekindled Latin fears and suspicions of the United States that he had worked so hard to overcome while secretary of state from to In , President Woodrow Wilson made clear that he would not support special interests trying to gain advantages in Latin America.
Dollar diplomacy as a policy was at an end in Latin America. Criticism of the policy continued. Roosevelt renounced dollar diplomacy. Both presidents attempted to construct what became known as the Good Neighbor Policy in dealing with Latin America, and the concept of the Taft-Knox doctrine was all but dead by the time of the Hoover administration.
In the long run, of course, 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. If the results of dollar diplomacy were meager in Latin America, where the United States was the dominant power, they were a disaster in China, the target for the Taft-Knox policy in East Asia.
Of course, the situation in the Far East was difficult. In the late nineteenth century and the first decade of the twentieth century much change had taken place. What specific forces or interests transformed the relationship between the United States and the rest of the world between and ? Was one approach more or less successful than the other? How so? What factors conspired to propel the United States to emerge as a military and economic powerhouse prior to World War II?
Section Summary All around the globe, Taft sought to use U. Mexico and Japan.
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