makes it impossible to arrive at an arbitral award, or refuses to live up to the decision given by the arbitrator.

2. The second development is, for American states, even more fundamental. It aims to remove the cause rather than to prescribe the cure. The Hague agreement does not limit the opportunity for economic absorption of weaker by stronger countries, neither does it effectively prohibit the creation of the shady class of governmental obligations which have been the perennial curse of the Caribbean. Economic exploitation in the Caribbean and northern South America means something entirely different from that for which it stands in the United States and in southern South America. All of these regions have had to rely on foreign capital for the development of their resources, but in the United States especially the money borrowed was put into enterprises managed by natives. The companies which used the money were not, properly speaking, foreign exploiting companies, but rather American companies which borrowed foreign capital. The history of much of our railroad development illustrates this condition. The investment, too, was regularly with us non-political. The rights of the concessionaires might come from the Government, but the capitalists seldom developed an important degree of control over the Government. In southern South America, the companies backed by foreign capital were often foreign in management, but they operated among people who were developing ability to create governments of real power, which would be able to guarantee peace and the protection of property. The local governments, that is,

were not in danger of becoming merely agents of foreign bondholders and concessionaires.

Now none of these conditions existed in the Caribbean or northern South America. The countries were undeveloped, the investments had to be made among people not able to carry out the economic projects involved and unable to command the confidence of foreign capitalists. The result was, the concessions in this region were granted to companies not only foreign in capital, but in management, and the concessionaire often took advantage of the weakness of the people with whom he dealt. Concessions were and are in this region frequently political as well as economic; in fact, they are often political rather than economic. In countries such as these where active capital for public enterprises is drawn largely from abroad, the foreign bondholder who absorbs the economic opportunities of the country exercises also great political control.

To cite the most signal example of this sort of foreign absorption is to cite the experience of Mexico, northwest of the Caribbean region, in which foreign investment has reached an unprecedented figure. The estimates compiled for the State Department show that Americans in that country own $1,057,770,000 of the $2,434,241,422 total national wealth. English citizens own $321,302,800, French citizens $143,446,000, while Mexican citizens own but $793,187,242 and all other nationalities $118,535,380.1 In other words, of the entire wealth of the Republic of Mexico less than 30 per cent. is in the hands of Mexicans.

1

Daily Consular and Trade Reports, July 18, 1912.

In this particular instance, the chief foreign capital interest is American. That it exercises a wide political influence in the Republic is undeniable. If in some country of the Caribbean similar economic conditions should arise, the invested capital being owned by some foreign country's nationals, the situation could hardly fail to cause the United States concern.

The possibility of such developments, indeed the possibility that any large foreign investment in public enterprises may become political in character, has led the United States in recent years to attempt to put itself in a position where it can control the total amount of the obligation which the weaker countries can be allowed to undertake. The concession or loan which has a political character and which may bring international complications, it has been felt, must be eliminated. This will be for the benefit of the foreign bondholders in that they will know that they are not running risks of such speculative nature as has formerly been the case. It will be to the benefit of the smaller states in that they will be protected against their own improvidence. It will be to the benefit of the United States in that, the political character of the investments being removed, the temptation of the European powers to call into question the Monroe Doctrine will be lessened.

Though this is not the avowed policy of either political party and probably the leaders of both would disclaim any intention to make the Monroe Doctrine other than a political one, the actual practice of both the Republican and Democratic Administrations shows that the State Department, no matter under whose

control, does not on this point follow a wavering policy. The attempt to protect the Cuban people against itself in the contracting of unwise debts has already been mentioned, but the beginning made there only pointed the way to a number of other agreements of a similar, but even more comprehensive, sort.

The Republican Administration of President Roosevelt saw the institution of a protectorate over the new Republic of Panama, and the Dominican Republic, with engagements concerning their finances. The Republican Administration of President Taft followed practically the same policy as was shown especially in the proposed treaties with Nicaragua and Honduras, which would have created conditions very similar to those in the Dominican Republic.

The policy of the Wilson Administration on this point is essentially the same. We now have new treaties with Nicaragua and Haiti, which involve us in the finances. of these countries. The maintenance of a force of American marines at Managua, under the Wilson Administration, illustrates in another way the protection of economic interests in order that political questions may not arise.

President Wilson, in his famous speech at Mobile, summarized the policy we are following. He declared:

"You hear of 'concessions' to foreign capitalists in Latin America. You do not hear of concessions to foreign capitalists in the United States. . . . They are invited to make investments. . . . It is an invitation, not a privilege; and States that are obliged, because their territory does not lie within the main field of mod

..

ern enterprise and action, to grant concessions are in this condition, that foreign interests are apt to dominate their domestic affairs: a condition of affairs always dangerous and apt to become intolerable. What these States are going to see, therefore, is an emancipation from the subordination, which has been inevitable, to foreign enterprise. They have had harder bargains driven with them in the matter of loans than any other peoples in the world. . . . I rejoice in nothing so much as in the prospect that they will now be emancipated from these conditions, and we ought to be the first to take part in assisting in that emancipation. .

"I want to take this occasion to say that the United States will never again seek one additional foot of territory by conquest. . . . She must regard it as one of the duties of friendship to see that from no quarter are material interests made superior to human liberty and national opportunity. I say this, not with a single thought that anyone will gainsay it, but merely to fix in our consciousness what our real relationship with the rest of America is."

The fact of the matter is that the diplomacy of the Caribbean and northern South America has always been very largely a diplomacy of claims. To call it "dollar diplomacy" gives it a bad ring, but does not change its character, and to consider that men with money to lend will do it without prospect of a return proportionate to the risk is presuming something contrary to human nature. The important point in the mind of the capitalist is to know that he will get a return of principal and interest. The important point for the Caribbean