From Colony to Superpower: U.S. Foreign Relations Since 1776 (61 page)

"The inevitable result of our building the canal," Root observed in 1905, "must be to require us to police the surrounding premises." In fact, the United States had long claimed the Caribbean as its exclusive preserve. In 1892, Harrison and Blaine arranged with U.S. bankers to get the Dominican Republic's debts out of the hands of European creditors. The Platt Amendment had imposed a protectorate on Cuba. Before the first dirt was shoveled in Panama, breakdown of the Harrison-Blaine deal and the threat of foreign intervention in the Dominican Republic led to the assertion through the so-called Roosevelt Corollary to the Monroe Doctrine of broad U.S. police powers in the hemisphere.
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The corollary developed out of a prolonged crisis in Venezuela that for nervous U.S. officials highlighted the threat of European and especially German intervention. Since independence, Latin American nations had contracted sizeable foreign debts, and private citizens of the Western nations mounted growing claims against Latin governments. Some claims were legitimate, some spurious, most inflated, but in the heyday of gunboat diplomacy governments were not disposed to discriminate and often backed their citizens with force. Latin Americans sought to turn European concepts of international law to their favor. The so-called Calvo Doctrine
asserted that investors and creditors were entitled to no special rights just because they were foreigners. The Drago Doctrine boldly claimed that the forcible recovery of loans violated the principle of sovereign equality among nations. Neither the Europeans nor the United States recognized such heretical notions. "We do not guarantee any state against punishment if it misconducts itself," Roosevelt proclaimed.
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Venezuelan indebtedness provoked a crisis in 1902. Falling back on the Calvo and Drago doctrines, the feisty and defiant dictator Cipriano Castro defaulted on loans held by British creditors and insisted that claimants must seek justice through Venezuelan courts. The great powers informed the United States in late 1902 that they would collect the debts—by force if necessary. Roosevelt gave them a green light, although he did warn, in view of the melon carving in China, that punishment must not "take the form of the acquisition of territory by any non-American power." The Europeans demanded that Venezuela pay. When Castro refused, they seized the dilapidated vessels that constituted his "navy," blockaded Venezuela's ports, and even bombarded Puerto Cabello. Other claimants—including the United States—now lined up to profit from Anglo-German aggressiveness.
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Roosevelt later claimed that by issuing a stern ultimatum he had forced the Germans to arbitrate, but resolution of the crisis appears to have been more complicated. Castro originally proposed U.S. arbitration, a shrewd ploy to exploit growing U.S. concern with European intervention. Roosevelt
was
increasingly troubled by German belligerence. The United States
did
have a strong naval force in the area, including Adm. George Dewey's flagship. But no evidence has ever been discovered of a presidential ultimatum. Recent research concludes, on the contrary, that although the Germans behaved with their usual heavy-handedness, in general they followed Britain's lead. The British, in turn, went out of their way to avoid undermining their relations with the United States.
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Both nations accepted arbitration to extricate themselves from an untenable situation and stay on good terms with the United States.

The Venezuelan episode persuaded administration officials to take steps to head off future European interventions. Britain and Germany encouraged the United States to take the lead in policing its hemisphere. In May 1904—ironically, or perhaps appropriately, at a dinner celebrating
the anniversary of Cuba's "independence"—Root delivered the statement that would become the Roosevelt Corollary to the Monroe Doctrine. "Any country whose people conduct themselves well can count on our hearty friendliness," he pledged. But "brutal wrongdoing, or an impotence which results in a general loosening of the ties of civilized society, may finally require intervention by some civilized society, and in the Western Hemisphere the United States cannot ignore this duty."
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Roosevelt's corollary thus upheld the original intent of the Monroe Doctrine by reversing one of its key provisions and explicitly giving the United States the right of intervention. It cleared up any ambiguity as to who controlled the region.

The administration first applied the corollary in the Dominican Republic. Even before Root's May 1904 statement, that beleaguered Caribbean nation had begun to come apart. A massive influx of U.S. investments and the conversion to an export economy had hopelessly destabilized Dominican life. The nation was deeply in debt to European and U.S. creditors, the victim of an incredibly complex set of sordid deals between its own often unscrupulous leaders and foreign loan sharks. It could not pay. It verged on anarchy, the result of bitter conflicts among groups an American with typical disdain dismissed as "political brigands . . . little better than savages."
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Dictator Carlos Morales flirted with saving himself from internal foes and external creditors by inviting a long-term U.S. protectorate. Dominican default on a stopgap debt arrangement and the Hague Court's award to Britain and Germany, seemingly rewarding their aggressiveness in Venezuela, threatened by late 1904 another European intervention in the Caribbean. Safely reelected, Roosevelt decided to act.
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The United States developed for the Dominican Republic what has aptly been called a "neo-colonial substitute."
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Roosevelt had no interest in annexation or even the protectorate proposed by Morales. He sought less drastic means that would help stabilize the Dominican Republic economically and politically and give the United States some control without formal responsibility. With two warships providing a "powerful moral effect on the rash and ignorant elements," a U.S. diplomat with a naval officer at his side negotiated a treaty (first proposed by Morales) giving the
United States control of the customs house and providing that 45 percent of the receipts should go to domestic needs, the rest to foreign creditors. When a now thoroughly contentious Senate refused to consider the treaty, Roosevelt used the threat of foreign intervention to proceed with an informal arrangement under an executive agreement. In 1907, the Senate approved a modified treaty.
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The Dominican experiment brought together diplomats, financial experts, and bankers in best Progressive Era fashion to employ "scientific" methods to promote stability and modernization. The U.S. government served as midwife, bringing in economist Hollander, who had already revamped Puerto Rico's finances, to scale back the Dominican debt, improve tax collection, and limit expenditures. Through government intercession, U.S. bankers offered Dominican bonds at high prices. To get the loan, the Dominican Republic accepted a receivership. The key was U.S. control of the customs houses, which would ensure regular payments to foreign creditors and the availability of funds for domestic needs. By removing the major prize and the means for competing factions to buy arms, it would also reduce the likelihood of revolution. Stabilization of the economy would encourage U.S. investment, which in turn would promote economic development.
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The arrangement brought dramatic short-term improvement and became the model for de facto protectorates elsewhere in the Caribbean and Central America and even in Africa.

William Howard Taft and his secretary of state, Philander Knox, formalized TR's ad hoc arrangements into policy. The enormous Taft and the diminutive (5' 5" tall) Knox, a corporate lawyer with the sobriquet "Little Phil," made an odd couple in appearance. Taft had a very hard presidential act to follow. It did not help that the onetime friends became bitter enemies before he took office. A capable diplomatic troubleshooter, Taft, by his own admission, had an "indisposition to labor as hard as I might" and a "disposition to procrastinate."
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He lacked Roosevelt's gift for public relations. Relations with Congress, already bad when Roosevelt left office, deteriorated sharply under his successor. Knox was cold, aloof, and impeccably dressed, a socialite and an avid golfer—he once affirmed that he would not let "anything so unimportant as China" interfere with his golf game. He worked short hours and took long Palm Beach vacations. While setting the broad contours of policy, he left the details to his
subordinates, mainly his abrasive and short-tempered assistant secretary of state, Francis Huntington Wilson.
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Taft and Knox adopted the Dominican model to develop a policy called "dollar diplomacy," which they applied mainly in Central America. They sought to eliminate European political and economic influence and through U.S. advisers promote political stability, fiscal responsibility, and economic development in a strategically important area, the "substitution of dollars for bullets," in Wilson's words.
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United States bankers would float loans to be used to pay off European creditors. The loans in turn would provide the leverage for U.S. experts to modernize the backward economies left over from Spanish rule by imposing the gold standard based on the dollar, updating the tax structure and improving tax collection, efficiently and fairly managing the customs houses, and reforming budgets and tariffs. Taft and Knox first sought to implement dollar diplomacy by treaty. When the Senate balked and some Central American countries said no, they turned to what has been called "colonialism by contract," agreements worked out between private U.S. interests and foreign governments under the watchful eye of the State Department.
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Knox called the policy "benevolent supervision." One U.S. official insisted that the region must be made safe for investment and trade so that economic development could be "carried out without annoyance or molestation from the natives."
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These ambitious efforts to implement dollar diplomacy in Central America produced few agreements, little stability, and numerous military interventions. Part of the problem was attitude. Knox and Wilson had little regard for Central Americans—"rotten little countries," the latter called them.
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They provoked staunch nationalist opposition. Guatemala and Costa Rica flatly rejected U.S. proposals, the latter turning to Europe to refinance its debt. Honduras's finance minister took flight rather than sign an agreement; its congress, under death threat from nationalist mobs, refused to make the country an "administrative dependency of the United States."
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When diplomacy failed, private interests took over. "Sam the
Banana Man" Zemurray, the legendary entrepreneur who had already begun converting Honduras into a "banana republic," helped finance a rebellion led by an African American soldier of fortune and supported by a U.S. warship. Upon taking power, a pro-U.S. government showed its gratitude by granting favors to Zemurray, who in turn negotiated a loan to help the new president pay off his debts.
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In the Dominican Republic itself, the much ballyhooed 1907 agreement broke down five years later amidst political upheaval. When rebels seized control of several customs houses, Taft sent in the Marines to put down the revolution, force out the president, and hold a new election. The U.S. military intervention of 1912 was the prelude to a much larger and longer intervention four years later.

Efforts to "stabilize" Nicaragua through dollar diplomacy also required U.S. military power. The independent and highly nationalist dictator José Santos Zelaya demonstrated his displeasure with the U.S. selection of Panama as the canal site by hinting that he might negotiate with a European nation. He also aspired to dominate Central America. When Zelaya threatened to invade El Salvador in 1909, the United States expressed strong disapproval, and U.S. investors encouraged a rebellion. When two Americans assisting the rebels were captured and executed, the United States broke relations and vowed to apprehend and prosecute Zelaya. The dictator fled to Mexico. After another change of government, the United States negotiated a Dominican-like treaty with Adolfo Díaz, formerly a bookkeeper with a U.S. mining company. By this time, the U.S. Senate was in full rebellion. The treaty never got out of the Foreign Relations Committee.

More deals and another revolution led to military intervention. Once it was clear the Senate would not approve the treaty, Taft, emulating TR, oversaw the negotiation of a private arrangement by which U.S. bankers gave the Díaz government cash in return for control of the National Bank of Nicaragua and 51 percent ownership of its railroads, initiatives that tied Nicaragua firmly to the U.S. economy and gave a huge boost to trade.
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The United States sent 2,700 marines to put down a 1912 rebellion. It left a "legation guard" of several hundred marines to symbolize its presence. In a treaty negotiated just before Taft left office, it gave Nicaragua $3 billion for a naval base and canal rights. The treaty was not ratified until 1916.

The Taft administration also tried dollar diplomacy in Liberia. By 1908, this West African nation founded in the nineteenth century by colonization societies and freed slaves was deeply in debt to British creditors, torn by internal rebellion, and embroiled in border disputes with neighboring British and French colonies. A U.S. commission warned that failure to solve Liberia's problems could result in its being colonized by Europeans and "speedily disappear[ing] from the map." It recommended use of the Dominican model with a U.S. Army officer assuming responsibility for building a military force to protect its frontiers. Taft approved the proposal to help America's "ward." A loan was arranged and a warship sent to contain the rebellion. When Congress blocked the Nicaraguan treaty, the administration worked out a private contract for Liberia under State Department supervision. The arrangement did not succeed. The U.S. receiver general and the Frontier Force were "unpopular and inept." The loss of trade from World War I plunged Liberia into deeper economic doldrums.
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