Exam 22: Global Involvements and World War I

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Dollar diplomacy refers to a foreign policy strategy adopted by the United States, particularly during the early 20th century, under President William Howard Taft, who served from 1909 to 1913. The term was coined to describe efforts by the U.S. government to promote its financial and business interests abroad, especially in Latin America and East Asia, by using economic power to achieve American policy goals.

The strategy involved using American investments to gain leverage in foreign countries, with the aim of creating stability and order that would benefit both the host countries and American economic interests. This was seen as a way to secure peace and stability while avoiding military intervention. The policy was also intended to counteract the influence of European powers in these regions by ensuring that countries in the Western Hemisphere remained within the U.S. sphere of influence, as outlined in the Monroe Doctrine.

One of the most notable applications of dollar diplomacy was in Nicaragua, where the U.S. provided loans and financial assistance to the government in exchange for control over its national bank and railway, and the right to intervene in the country's affairs to protect American interests. This led to the establishment of a pro-U.S. government and the protection of American investments in the country.

Dollar diplomacy was significant because it represented a shift from the more aggressive military interventions of the previous Roosevelt Corollary to the Monroe Doctrine, which had justified such interventions as a means of maintaining order in the Western Hemisphere. Instead, Taft's policy sought to extend American influence through economic means. However, the approach was criticized for prioritizing American business interests at the expense of the sovereignty of other nations and for entangling the U.S. in the internal affairs of other countries, which sometimes led to resentment and anti-American sentiment.

The term "dollar diplomacy" is often used in a pejorative sense to describe a form of imperialism that substitutes dollars for bullets. It is seen as a way for a powerful country to exert influence without direct military involvement but with similar outcomes in terms of dominance and control. The legacy of dollar diplomacy has had a lasting impact on the perception of American foreign policy, particularly in Latin America, where it has contributed to a historical wariness of U.S. intentions.