U.S. and World Economy
March 6, 2014
Review: A World Safe For Capitalism
The United States’ presence in the Caribbean was very palpable in the late 19th century, and after a quick victory during the Spanish-American War over the Spaniards, the United States was the sole hegemon within the New World. After ousting the Spanish from the region, the complete annexation of the Caribbean was completed in less than a decade. This included Puerto Rico, Cuba and in 1905 the Dominican Republic (all Spanish territories at one point). In January of 1905 American’s were notified that U.S. diplomats would be taking over Dominican “custom houses”. These “custom houses” generated nearly all of the revenue that the small republic could conjure up. The officials left the Dominican’s to allocate a measly 45% of their total revenue for domestic projects and expenditures. The other 55% would be expropriated to pay the country’s creditors. This consisted of European and American investors who had a vested interest in doing as they pleased with Dominican finances. The utter takeover of the country’s fiscal prospects was extolled as “one of the momentous steps in the history of American international relations” (pg. 2).
The SDIC (or San Domingo Improvement Company, a New York based firm) had taken over the foreign Debt of the Dominican Republic in 1893. Smith Weed, the president of the firm, maintained friendships with people at the highest levels government, which included but was not limited to Grover Cleveland. The firm felt the insatiable desire to wrest control of Dominican Finances from the Europeans. Between 1893 through 1899 the firm had a virtual monopoly over said finances and this acquisition of power and capital was brought about by the relationship that was forged with Ulises Heureaux, the Dominican president at the time. The SDIC sold nearly 30 million dollars of Dominican bonds to Europeans. This flow of bonds into capital markets coupled with the printing of money (leaving an excess supply of cash, causing the currency to become devalued) pushed the island into complete financial collapse. This fomented public upheaval and the orchestration of a formidable opposition to Heureaux and the Improvement Company. Heureaux’s life came to an abrupt end after a group of disgruntled citizens acted upon a plot to assassinate the unsuspecting leader in 1899. With his demise came the full demonization and removal of the SDIC. From 1901 to 1904 the company was supported by the full faith and backing of the State Department and U.S. Navy in the company’s grievances against the seemingly recalcitrant island. There was a collusion afoot, however transient, between the SDIC and the U.S. Government. When the new Dominican president refused to accept the conditions of the SDIC debt agreements, the U.S. deployed the U.S. Navy Caribbean Squadron to placate the political tumult that...