Privatizing Empire: An Appreciation of Emily Rosenberg

​Any short list of my favorite diplomatic historians has to include Emily Rosenberg. Rosenberg is a pioneering historian in multiple dimensions, including her Spreading the American Dream (Hill & Wang, 1982), one of the important early depictions of “Americanization” (more on that later); in her work on gender and diplomacy, helping to center gender even in – especially in -- the mighty halls of international power; and, most germane to one of our current conversations, her scholarship on the privatization of American power.

A work that deserves a much wider readership is her Financial Missionaries to the World (Duke, 2003.) Here Rosenberg highlights an essential theme for this blog: the crucial distinction -- in America generally and in U.S. policy both foreign and domestic -- between the public and the private. We have been discussing public goods, and we have already considered how Americans generally regard conventional diplomacy as a public good, one that often carries overtones of regret, even distaste. As Financial Missionaries to the World shows, one particular genius of U.S. foreign policy has been to relocate many of diplomacy’s activities and aims to the realm of private goods, subject to private considerations, making those aims more palatable (for some) but also removing foreign policy from democratic accountability.

Financial Missionaries to the World: The Politics and Culture of Dollar Diplomacy, 1900–1930 (American Encounters/Global Interactions): Rosenberg, Emily S.: 9780822332190: Amazon.com: Books

Throughout the 19th and well into the 20th century, a primary concern of U.S. foreign policymakers was to maintain stability, economic as well as political, in Latin America. American commercial and financial interests maintained investments that needed to be safeguarded from the political unpredictability that pervaded the region (due, it must be said, most often to the ongoing intervention of American and European quasi-colonial interference.) This was accomplished, among other means, by dozens of American military interventions into the region well into the 1930s, all of which, according to our terminology, constituted extensions of public American power. It was those “other means,” however, that Rosenberg highlighted so well.
 
Rosenberg offered in exquisite detail a history of what is still known in the textbooks as “dollar diplomacy.” Once the great silver onslaughts of the late 19th century had been beaten back, a broad and stable consensus prevailed, at least until the great depression of the 1930s, that the gold standard fostered monetary stability, which in turn promoted trade and allowed for the secure extension of credit, both permitting greater industrial expansion. Gold, its adherents maintained, comprised a common standard that made the same rules applicable to all. If foreign governments could be persuaded (or forced) to adapt their economic systems to gold, a disciplinary mechanism would be imposed, curtailing the highly inflationary monetary whims of unscrupulous leaders. Regulating and regularizing markets through the miracle of the gold standard’s stabilizing factors would eliminate abuses by local elites, warlords, and irresponsible financial predators. “Dollar diplomacy was managerial capitalism taken offshore,” Rosenberg explains.
 
The State Department had no mechanism to force the adoption of the gold standard. But developing countries throughout Latin America were always much in need of capital, which meant that American loans were always very much wanted. If those loan contracts could be drawn up in such a way as to mimic gold – that debtor nations would have to agree to rigid repayment terms, maintenance of currency standards, and so forth – much the same outcome could be achieved. Secure loans repaid by stable currencies would make those loans good as gold, imparting the fiscal disciplines on foreign regimes necessary to allow markets to function. Dollar diplomacy, in other words, aimed to “rehabilitate foreign economies through loan controls in private contracts.” Integration into global markets would, so it was confidently asserted, bring uplift and development to all. Capitalism would bring civilization, but first discipline had to be imposed. What we have, in other words, is the coming together of capitalism and imperialism, in the form of the gold standard’s proxy, the dollar
 
The heart of Rosenberg’s book details the development of a stratagem whereby the State Department would foster (and foist) private loans from American banks onto Latin American regimes. Such loans carried with them the promise of increased trade and the guidance of American economic experts. But they came laden with a host of demands, including monetary stability, and with strict repayment terms. Expert guidance, as Rosenberg painstakingly reconstructs, came to amount to “financial supervision.” Breaking the provisions of the loans would and could be financially ruinous, and might even call for a military intervention. In short, as any good loan shark knows, dollar diplomacy created dependency. A new form of political control had been invented, via private means, precisely at the time, shortly after the Filipino-American War, when the appetite for direct imperial control, had collapsed. Dollar diplomacy moved imperial supervision out of the realm of conventions and treaties and into the private world of contract. Congressional approval, and hence public scrutiny, was thus bypassed.
 
Foundational to the scheme was not only the financial and political terms to which Latin American governments were obliged to bend. It was the fact that the loans themselves were proffered by private banks, operating ostensibly in the sole interest of private profit seeking. In this way the State Department maintained a type of plausible deniability, allowing Washington to “extend U.S. influence by using bankers rather than Marines." The relationship turned on the fact that there existed a revolving door between the Senate, the State Department, and the big Manhattan banks at the center of the arrangement: all the players knew each other, mingled socially, went to the same schools, sat on each others’ boards, hired each other. Of course, in due time, military intervention would be required to enforce the terms of the contracts, to protect vulnerable customs houses, and to guard against populist coups that threatened to invalidate the contracts. But in America, public power has always, and seemingly, is always, available to safeguard private interests at public expense.
 
American imperial influence abroad can be carried at the point of a bayonet. The State Department and the Pentagon have mechanisms enough for formal demonstrations of force. But throughout U.S. history, and accelerating in the 19th century, much American influence has been carried on by private interests. In this way it remains hidden from view, but is no less efficacious for the disguising. American culture makes a sharp distinction between private power, to which we historically have wanted to give as wide a compass as possible, and public power, about which since 1776 we maintain tremendous reservations. Privatization is a way out of this impasse for ambitious Americans, offering means to exercise immense power abroad while protecting its operations from view, or at least from scrutiny -- though it is almost certainly the case that such disguising works much more effectively to hide power from Americans than from the non-Americans so often its object. Emily Rosenberg’s work, which we will feature again, decisively helps us understand the operations of this power.
 
Further reading: Emily Rosenberg, Financial Missionaries to the World (Duke, 2003)