Tag: Liberalism

Synopsis:

Examinations of so-called ‘dollar diplomacy’ usually concentrate on American foreign policy before World War One, but Herbert Feis deviates from convention by analyzing the interwar period’s dollar diplomacy – and how such diplomacy influenced the emergence of World War Two. Dollar diplomacy during the interwar period began with private investment as its prime mover, but gradually became more government directed. According to Feis, failure to synergistically fuse credible military deterrence with dollar diplomacy tended to amplify the weaknesses of the policy.

Excerpts:

“The prevailing view was that the American citizen should not be taxed and the American Government should not borrow in order to lend abroad; that foreign seekers of capital should go to the private American investor for it; that he could make his decisions and arrange his deals on a paying business basis while the Government could not.

“The officials concerned were guided more by theory and principle – right or wrong – than by strategy. The theory, derived from domestic finance, was that investment was a private business. The principle was that we sought little from the outside world, save that it be peaceful and pay its debts.

“A substantial fraction of our loans served merely to enable foreign borrowers to pay older or other obligations. Thus, we supplied the means by which Germany paid reparations, thereby indirectly supplying the means whereby our Allies paid debts to the American Treasury and interest on earlier loans made by private American lenders.

“We mistook the good that could have come under the circumstances from sending our capital abroad; and then spoiled the chance of doing any lasting good because other branches of our foreign policy were so defective. After our attempt to organize peace on the basis of treaties failed, we strove to be neutral, isolated, and unoffending.

“It is essential to maintain constant and coherent connection between the diplomacy of the dollar, our domestic and foreign economic policies, our political relations, and our military effort. Each must serve the others and be adjusted to the others.

*All excerpts have been taken from The Diplomacy of the Dollar: 1919-1932, W.W. Norton & Company, Inc.