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The Empire Trap

The Empire Trap: The Rise and Fall of U.S. Intervention to Protect American Property Overseas, 1893-2013

Noel Maurer
Copyright Date: 2013
Pages: 512
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  • Book Info
    The Empire Trap
    Book Description:

    Throughout the twentieth century, the U.S. government willingly deployed power, hard and soft, to protect American investments all around the globe. Why did the United States get into the business of defending its citizens' property rights abroad? The Empire Trap looks at how modern U.S. involvement in the empire business began, how American foreign policy became increasingly tied to the sway of private financial interests, and how postwar administrations finally extricated the United States from economic interventionism, even though the government had the will and power to continue.

    Noel Maurer examines the ways that American investors initially influenced their government to intercede to protect investments in locations such as Central America and the Caribbean. Costs were small--at least at the outset--but with each incremental step, American policy became increasingly entangled with the goals of those they were backing, making disengagement more difficult. Maurer discusses how, all the way through the 1970s, the United States not only failed to resist pressure to defend American investments, but also remained unsuccessful at altering internal institutions of other countries in order to make property rights secure in the absence of active American involvement. Foreign nations expropriated American investments, but in almost every case the U.S. government's employment of economic sanctions or covert action obtained market value or more in compensation--despite the growing strategic risks. The advent of institutions focusing on international arbitration finally gave the executive branch a credible political excuse not to act. Maurer cautions that these institutions are now under strain and that a collapse might open the empire trap once more.

    With shrewd and timely analysis, this book considers American patterns of foreign intervention and the nation's changing role as an imperial power.

    eISBN: 978-1-4008-4660-3
    Subjects: Economics, Political Science, History

Table of Contents

  1. Front Matter
    (pp. i-iv)
  2. Table of Contents
    (pp. v-vi)
    (pp. vii-xii)
  4. one Introduction
    (pp. 1-24)

    In 1900, Venezuelan president Cipriano Castro seized properties belonging to the American asphalt trust. Venezuelan troops forcibly ousted the trust’s employees and occupied its facilities on the shores of Lake Bermúdez, one of the largest natural tar pits in the world. The McKinley administration protested, and the Navy Department ordered three warships to the scene, but the United States did not intervene. Dissatisfied with the official response, the asphalt trust immediately set out arming a rebellion to overthrow Castro’s government. American corporate support for the rebels led Castro to seize British-flagged vessels carrying weapons for Castro’s opponents. That in turn...

  5. two Avoiding the Trap
    (pp. 25-57)

    In 1898, the United States expanded into Hawaii, Puerto Rico, and the Philippines. Afterward, however, formal expansion essentially ceased save a few small exceptions. Moreover, none of those exceptions were driven by the demands of U.S. investors.¹

    Why was America’s burst of formal overseas expansion so short-lived? After all, in theory one of the best ways to protect your country’s investments in a foreign area is to make that area no longer foreign. Britain, France, Italy, Japan, Germany, and the Soviet Union continued to annex foreign territories until the end of the Second World War. There was no sea change...

  6. three Setting the Trap
    (pp. 58-88)

    Formal imperialism was off the table after 1900, but the property rights of Americans continued to come under threat from a combination of feckless foreign governments and political instability. Governments in Venezuela and the Dominican Republic confiscated American direct investments, while other Latin American governments defaulted on their debts to American creditors. After the 1893 intervention in Hawaii, the 1895 resolution of the Venezuela-Guyana boundary dispute, the 1898 Spanish-American War, and the 1903 machinations that cleaved Panama from Colombia, it would be hard for any American administration to argue that it did not have the power to intervene on behalf...

  7. four The Trap Closes
    (pp. 89-147)

    At the turn of the twentieth century, the leaders of American foreign policy believed they had identified poor fiscal conditions as the key factor destabilizing the nations of Latin America. In January of 1900, General Leonard Wood, the American military governor of Cuba, wrote to U.S. secretary of war Elihu Root: “When people ask me what I mean by stable government, I tell them that when money can be borrowed at a reasonable rate of interest and when capital is willing to invest in the island, a condition of stability will be reached.”¹

    General Wood was an unusually flat-footed diplomat,...

  8. Five Banana Republicanism
    (pp. 148-187)

    Republican Warren Harding entered the White House determined to escape the imperial entanglements that had ensnared his predecessor. Harding’s election by a 26-point margin in 1920 was less an endorsement of the merits of the victor—a relatively unknown senator from Ohio who beat a relatively unknown governor from Ohio—than a repudiation of the Wilson years. His Democratic opponent, James Cox, won his only electoral votes in the “Solid South,” a one-party fiefdom in which the largest Republican constituency—African-Americans—was denied the right to vote. Harding, campaigning on a return to “normalcy,” had little foreign policy knowledge and...

  9. six Escaping by Accident
    (pp. 188-244)

    The Great Depression was a breakpoint between two eras, a sharp discontinuity between the global boom of the 1920s and the palsied, stunted economies of the 1930s. The Depression was also a time of rapid political transition. In many countries, political opportunists used the Depression to pursue nationalist, militaristic, and even genocidal goals. Hitler, Stalin, Mussolini, and other demagogues skillfully played on Depression-era fears and anxieties to maximize their own power and garner support for the use of force—against their own populations as well as foreign ones.

    In the United States, however, the Depression reorganized politics in such a...

  10. seven Falling Back In
    (pp. 245-312)

    Though it was Herbert Hoover who coined the phrase “good neighbor” to describe the United States’ ideal relationship with Latin America, the Good Neighbor policy ultimately became associated with his successor, Franklin Roosevelt. In his inaugural address, Roosevelt strove to distance himself from Hoover’s more ambiguous public statements about America’s informal empire: “In the field of world policy I would dedicate this nation to the policy of the good neighbor, the neighbor who resolutely respects himself and, because he does so, respects the rights of others, the neighbor who respects his obligations and respects the sanctity of his agreements in...

  11. eight The Empire Trap and the Cold War
    (pp. 313-349)

    After 1945, the United States once again found itself dragged into fights over the property rights of American citizens outside its territory. Despite revolutionary changes in the strategic environment, the pattern changed little from the one established during the Roosevelt administration. Foreign governments would nationalize or threaten to nationalize American investments. The American government would respond with sanctions or threats of sanctions, the possibility of covert action hovering in the background. After a delay—with one major exception in Cuba—the sanctioned country would reverse the nationalization or provide more-than-adequate compensation.

    In the context of the Cold War, however, the...

  12. nine The Success of the Empire Trap
    (pp. 350-386)

    From the investors’ point of view, the post-1945 second American empire worked very well. Between 1945 and the Iranian Revolution of 1979, American investors failed to recoup the value of their investments in only four disputes over natural resource investments that did not involve the Soviet Union: Bolivia in 1952 and 1969, Ecuador in 1972, and Kuwait in 1975. In Bolivia, the reason for the losses was not that the Bolivian government resisted American pressure, but that the American investors asked for and received what turned out to be a bad deal ex post. Libya, Iraq, and Syria also failed...

  13. ten Escaping by Design?
    (pp. 387-432)

    The world of investor protection changed radically between 1945 and 1990. The changes were slow, incremental, and mostly unplanned. Their cumulative effect, however, was revolutionary. Before 1945, the only substantive recourse available to an American company caught in an investment dispute with a foreign government was to call on the coercive power of the U.S. executive branch. American courts were useless; sovereign immunity reigned supreme. The executive might threaten, sanction, or overthrow foreign governments, but U.S. courts would not enforce judgments against them. International tribunals existed but required the U.S. government to espouse the claims of its citizens and depended...

  14. eleven The Empire Trap in the Twenty-first Century
    (pp. 433-452)

    This book has sought to explain patterns of U.S. government intervention on behalf of its citizens’ overseas property rights over the course of the twentieth century. The point of departure was the following paradox: although U.S. governments throughout the century categorically rejected interventionism designed to favor or protect Americans, time and again they found themselves compelled to interfere in the affairs of foreign nations on behalf of private American interests.

    The mechanism of the empire trap explains U.S. administrations’ apparent inability to avoid overseas entanglements, even when presidential preferences and the national interest pointed toward nonintervention. The political clout of...

  15. NOTES
    (pp. 453-536)
  16. INDEX
    (pp. 537-558)