Dollar Diplomacy

Political campaigns emphasized domestic issues in the 1920s, but while the United States refused to join the League of Nations, the federal government remained deeply engaged in foreign affairs. Republican presidents worked to advance U.S. business interests, especially by encouraging private banks to make foreign loans — part of the broader government-business alliance in Republicans’ associated state. Policymakers hoped loans would stimulate growth and increase demand for U.S. products in developing markets. Bankers, though, wanted government guarantees of repayment in countries they perceived as weak or unstable.

Officials provided such assurance. In 1922, for example, when American banks offered an immense loan to Bolivia (at a hefty profit), State Department officials pressured the South American nation to accept it. Diplomats also forced Bolivia to agree to financial oversight by a commission under the banks’ control. A similar arrangement was reached with El Salvador’s government in 1923. In other cases, the United States intervened militarily, often to force repayment of debt. To implement such policies, the U.S. Marines occupied Nicaragua almost continuously from 1912 to 1933, the Dominican Republic from 1916 to 1924, and Haiti from 1915 to 1934.

In these lengthy military deployments, Americans came to think of the occupied countries as essentially U.S. possessions, much like Puerto Rico and the Philippines. Sensational memoirs by marines who had served in Haiti popularized the island as the “American Africa.” White Americans became fascinated by vodou (voodoo) and other Haitian religious customs, reinforcing their view of Haitians as dangerous savages or childlike people who needed U.S. guidance and supervision. One commander testified that his troops saw themselves as “trustees of a huge estate that belonged to minors. … The Haitians were our wards.”

At home, critics denounced loan guarantees and military interventions as dollar diplomacy. The term was coined in 1924 by Samuel Guy Inman, a Disciples of Christ missionary who toured U.S.-occupied Haiti and the Dominican Republic. “The United States,” Inman declared, “cannot go on destroying with impunity the sovereignty of other peoples, however weak.” African American leaders also denounced the Haitian occupation. On behalf of the Women’s International League for Peace and Freedom and the International Council of Women of the Darker Races, a delegation conducted a fact-finding tour of Haiti in 1926. Their report exposed, among other things, the sexual exploitation of Haitian women by U.S. soldiers.

By the late 1920s, dollar diplomacy was on the defensive, in keeping with a broader disgust over international affairs. At the same time, political leaders became frustrated with their poor results. Dollar diplomacy usually managed to get loans repaid, securing bankers’ profits. But the loans often ended up in the pockets of local elites; U.S. policies failed to build broad-based prosperity overseas. Military intervention had even worse results. In Haiti, for example, the marines crushed peasant protests and helped the Haitian elite consolidate power. U.S. occupation thus helped create the conditions for harsh dictatorships that Haitians endured through the rest of the twentieth century.

PLACE EVENTS IN CONTEXT

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