Dollar diplomacy involves investing in foreign nations for US self-interest. President Taft popularized the term by investing in infrastructure in exchange for concessions. The US has used this diplomacy to shape regulatory policy and secure political power. Beneficiaries have protested, but the US argues it benefits them too. Today, the focus is on helping allies achieve independence for positive relationships.
Dollar diplomacy involves investing in foreign nations to stabilize them. The term is often used specifically to represent US self-interest efforts; in this sense, it is diplomacy that will serve the interests of the United States. This approach has long been practiced by a number of nations, not just the United States.
The term was popularized during the tenure of President Taft, who notably used dollar diplomacy to “send dollars instead of guns” to areas where the United States had an interest. The government did things like acquire debt held by insolvent nations and invest in infrastructure in countries that couldn’t afford it. In exchange for this, the US government expected some concessions from the countries it was assisting.
At times, the United States has used this form of diplomacy so that it can play a role in shaping regulatory policy in a way that would be beneficial to American companies. This included lobbying companies to enact lax laws to protect workers, limit the taxation of foreign companies, and other activities. It has also been used to secure political power, as seen when the United States reserved the right to vet appointees to key political positions, and sometimes to appoint them outright.
The beneficiaries of dollar diplomacy were in a difficult position. These nations needed the financial assistance and benefited from the skills, equipment and funds that American companies brought to their borders. Nations have also chafed at being led by the United States, however, and have felt domestic pressure due to the country’s control. Some citizens of these nations have protested, sometimes violently, and the history of this practice in areas such as Latin America and Southeast Asia has played a role in military conflicts sparked by resentful citizens.
The United States argued that while the policy certainly had the effect of opening up foreign markets and creating a favorable business climate for American companies, that it benefited the United States, it was also beneficial to the beneficiaries. It has created jobs, infrastructure and security for some nations and, in fact, the United States continues to invest in foreign allies in order to help them recover and stabilize after military conflicts, economic crises and political turmoil. The focus today is less on self-interest, however, and more on helping U.S. allies and friends achieve political, economic, and social independence to forge positive long-term relationships.
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