Dollar Diplomacy Test Questions – Flashcards

President Willian Howard Taft, replaced Roosevelt in 1908 with the vision to continue Roosevelt's foreign success, this led to the creation of the Dollar Diplomacy. In short, President Taft did not believe in the Big Stick, instead, Taft sought to use the Dollar Diplomacy as the policy that used America's financial powers rather than military intervention, to extend their influence abroad. The policy would force Latin American nations to become dependent on the dollar to prevent any European intervention. Like the Corollary, the Dollar Diplomacy wished to remove any pretext for European intervention in Latin American countries by managing the financial affairs of countries whose economics were 'backwards' by American standards.

It began with Roosevelt forced through the building of the Panama Canal and ensured it would be under the control of America for a price

The main aim of Dollar Diplomacy was to remove any pretext for European intervention in Latin American countries by managing the financial affairs of countries whose economics were 'backwards' by American standards. This was because it would disrupt its sphere of influence

The US were prepared to use American loans to pay off European creditors. Financial managers would then move in and remake the economy that was better suited to the US's trade and business interests. Tax would be collected more efficiently, budgets regularized and a form of gold standard adopted.

Taft introduced it because he wanted build upon the success of Roosevelt's foreign policy but he was also had a progressive mindset this meant he did not sought out the military threat but instead used US economic powers. This was in order for the US to extend its foreign policy abroad without creating a war and that the big stick policy was a thinly field imperialism. He also used it as he wanted America to be less involved in World Affairs, except for trade, as outlined by George washington.

The Dollar Diplomacy impacted Costa Rica, Guatemala, Honduras, Haiti, Dominican Republic, Nicaragua, Liberia, Japan, Russia and China.

Honduras initially rejecting and refusing to sign the treaties based on the principles of Dollar Diplomacy as relations with the US began to sour, this was mainly due to the US buying all the national debt of Honduras to establish US financial control there, this made Honduras dependent on the US dollar. However, the US did not respond too kindly to rejection of the treaties, President Taft provoked a US-sponsored revolution, which installed a pro-US regime that was more amenable to the dictates of Dollar Diplomacy.

Nicaragua was another trouble spot for US diplomacy. Sour diplomatic relations between America and Nicaragua led to the Zelaya government refusing the principles of Dollar Diplomacy. However, in response to the nationalism of the Nicaraguan leader, Zelaya, US mining interests sponsored a revolution that was backed by Taft's government. The US senate would then not ratify the treaty with Nicaragua, this led to private US companies and banks acquiring controlling interests in Nicaraguan banking and railroads, which forced the country to cooperate. Such economic imperialism was bound to enrage already tense nationalist sentiments and the US increased its military support to suppress another revolution in 1912. The US military would remain in Nicaragua for another 13 years.

Dollar Diplomacy was not only restricted to Latin America, Liberia in West Africa were in deep debt and was soon to be colonised by the British and the French. However, the Taft administration approved a loan and the menacing presence of a US warship, which reintroduced the Big Stick policy. The Dollar Diplomacy was unable to stop Liberia's financial and political problem but aided the US by preventing Liberia to be annexed by European powers, protecting the US's sphere of influence. This worsened relations between America and European powers such as France and Britain.

President Taft wanted to contain the influence in China by investing heavily in their railway network. Historian, Tom Leppard, discusses that the Dollar Diplomacy was a means to curtail Japanese and Russian influence in China and Manchuria. Like many parts in the world, having an effective railway system was the key to economic expansion. The US arranged to be an investor in the development of this system in Manchuria. Eventually, Russia and Japan cooperated in dividing the Manchurian economic interest between them and the Chinese government was not strong enough to oppose them. The Dollar Diplomacy led to the US being unable to secure the support of France and Great Britain, which evidently mean they had to settle for a more moderate financial intervention in China.

Historian, Yvonne Berliner, introduced the idea that a marked gap between the theory of Dollar Diplomacy and its practice occurred between the United States and Latin American countries, as the United States believed it was rational and 'progressive', Latin Americans could not help but see them as very thinly veiled imperialism. The Dollar Diplomacy led to a souring of diplomatic relations between America, Cost Rica and Guatemala.