Abstract

"International Financiers and the Reinvention of U.S. Neutrality in the circum-Caribbean, 1900-1914"

David Shorten, Harvard Business School (dshorten@hbs.edu)

During the early twentieth century, the dramatic growth of United States citizens’ economic power abroad, and the nation’s increased involvement in international affairs, exposed cracks in the foundations of U.S. neutrality. Neutrality, a principle in international law characterizing relations among nations, could be defined as a nation’s promise not to disproportionately influence the course of foreign conflicts. In the United States, federal neutrality statutes deterred citizens (and resident aliens) from violating the United States’ duties to remain neutral. However, the nation’s venture into international investments—or, more precisely, U.S. investors’ increased holdings of foreign securities and foreign direct investments, concentrated in Latin America—placed new kinds of pressure on neutrality. Between 1897 and 1910, U.S. international investments increased rapidly from less than $700 million to more than $3.5 billion. On one hand, the structures of international investing entwined the long-term interests of investors and foreign states, which gave investors incentives to support embattled regimes or oppose them, depending on how it affected their investments (and those of their competitors). On the other hand, international financiers easily evaded the law’s grasp. Financiers supported belligerent causes outside of U.S. jurisdiction without violating the law. What’s more, the narrowly tailored neutrality statutes did not inhibit them from doing so even from within U.S. borders. These problems led to calls for revisions to U.S. neutrality laws. This paper recovers international financiers’ perspectives, especially how and why they invested in the circum-Caribbean and became entangled in revolutionary activities, by examining archival and printed records of bankers, bondholders, and financiers, particularly those of the British Corporation of Foreign Bondholders. Tracing the reinvention of U.S. neutrality back to the changing structures of international finance in the circum-Caribbean before World War I, it will offer groundwork for reconsidering a multi-generational movement to maintain peace through neutrality.