Dollar Diplomacy

<h1>Text Preview</h1> <p> <P>William Howard Taft was easily elected in 1908, because a majority of Americans believed that he would continue the popular Republican policies laid out by President Roosevelt. Taft was susceptible to outside pressure, and he often submitted to the desires of Congress and special interest groups. Roosevelt and many Americans were angry and dismayed when Taft began to stray from the Republican platform. However, one area in which Taft consistently pursued Roosevelt’s aims was in expanding America’s influence abroad.<BR></P> </p> <p> <P>Taft used America’s growing economic power as a diplomatic tool. He urged Wall Street investors to invest money in foreign markets in order to increase American influence abroad. Investors were especially encouraged to invest their money in foreign markets in which the U.S. had strategic interests, such as the Far East and the Panama Canal region. Many people were critical of Taft’s plan and his critics denounced this strategy as “dollar diplomacy.” In fact, the senate refused to sign several treaties, but the president encouraged private banks and Wall Street investors to act independently.<BR></P> <P>One goal of dollar diplomacy was to preempt foreign powers from gaining or enlarging an investment foothold in key markets. Many European countries had been imperial powers for decades and held a significant advantage over the U.S. in several global markets. The administration believed that if American investors were firmly situated in these markets economic rivals such as Germany would be unable to continue their dominance. Taft believed that the increased investment would not only benefit the U.S. but its trade partners as well, creating better foreign relations. Taft also assumed that the expenditure of money in foreign markets would increase American influence abroad and would help further its foreign policies. Of course, the overriding belief was that foreign investments would enhance American businesses, which in turn would grow the economy and enrich the government.<BR></P> </p> <p> <P>A primary focus of dollar diplomacy was the Manchurian region of China. Japan and Russia controlled a large portion of Manchurian resources including the railroads. Taft, like many people of the era, believed that whoever controlled the railroads also controlled the economy. He believed that without an interest in the Manchurian railroad system, the U.S. would be frozen out of the emerging Chinese markets and the Unite States’ “open door” policy in China would be undermined. Taft personally sent a telegram to the Chinese Government on behalf of American investors interested in railroads in the Yangtze Valley. In 1909, Secretary of State Philander C. Knox offered the Japanese and Russians a deal. He proposed that American bankers and industrialists would purchase the Manchurian railroads from Japan and Russia and return them to Chinese control. Japan and Russia flatly refused the offer, which publicly embarrassed the Taft administration. Taft persevered in his efforts to gain influence in China, and in 1912 the U.S. and five other nations offered the new Chinese Republic a huge loan.<BR></P> </p> <p> <P>In an extension of the Roosevelt Corollary, Taft encouraged investors to spend money in Latin American countries such as Honduras and Haiti. Adhering to the Monroe Doctrine of 1823, Taft would not allow foreign investors into Latin American markets, so America felt a responsibility to support these financially struggling republics. Many of these nations were constantly on the verge of financial collapse and required foreign investment to strengthen their shaky foundations. Political turmoil in this region later required U.S. troops to protect the substantial American investment. In 1912, a group of 2,500 marines landed in Nicaragua to suppress a rebellion, and they remained for 13 years due to continued instability. This was another action that increased distrust of America among many Latin American nations. <BR></P> </p> <p id="TextCopyright">Copyright 2006 The Regents of the University of California and Monterey Institute for Technology and Education</p>