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Foundations of United States International Financial Power: Gold Standard Diplomacy, 1900–1905

Published online by Cambridge University Press:  11 June 2012

Emily S. Rosenberg
Professor of history at Macalester College.


From 1900 to 1905 the United States government, working with a small group within the emerging profession of economics, developed—for the first time—a financial policy toward foreign dependent areas. The policy devised and carried out by this first generation of experts in foreign currency reform—who included Charles Conant, Jeremiah Jenks, and Edwin Kemmerer—sought to bring nations onto a gold-exchange standard, with their gold funds deposited in New York and their coinage denominated on American money. In this article, Professor Rosenberg describes this gold standard diplomacy, suggesting that it reflected the nation's growing economic power; its increasing stake in maintaining an integrated, stable, and accessible international order; the emergence of a new profession of foreign financial advising; and the government's new desire to play a leading role in international currency matters. She concludes that policymakers and economists would build on this foundation in developing the gold-exchange standard and currency stabilization programs of the 1920s.

Copyright © The President and Fellows of Harvard College 1985

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1 Recent studies of turn-of-the-century economic foreign policy are Becker, William, The Dynamics of Business-Government Relations: Industry and Exports, 1893–1921 (Chicago, 1982)Google Scholar; Healy, David, United States Expansion: The Imperialist Urge in the 1890s (Madison, Wisc, 1970)Google Scholar; LaFeber, Walter, The New Empire: An Interpretation of American Expansion, 1860–1898 (Ithaca, N.Y., 1963)Google Scholar; McCormick, Thomas, China Market: America's Quest for Informal Empire, 1893–1901 (Chicago, 1967)Google Scholar; Rosenberg, Emily S., Spreading the American Dream: American Economic and Cultural Expansion, 1890–1945 (New York, 1982)Google Scholar; Terrill, Tom E., The Tariff, Politics, and American Foreign Policy, 1874–1901 (Westport, Conn., 1973)Google Scholar; and Werking, Richard H., The Master Architects: Building the United States Foreign Service, 1890–1913 (Lexington, Ky. 1977).Google Scholar

2 Brown, William Adams Jr, The International Gold Standard Reinterpreted, 2 vols. (New York, 1940)Google Scholar, and Yeager, Leland B., International Monetary Relations: Theory, History, and Policy (New York, 1976)Google Scholar provide good descriptions of the late-nineteenth-century gold standard.

3 On the foreign policy implications of the currency debate, see McCormick, China Market, 30–32, and LaFeber, New Empire, 153–59.

4 Dinwiddie, William, “The Money of Puerto Rico,” Harper's Weekly 42 (1898): 1286Google Scholar; Whelpley, J. D., “The Currency of Puerto Rico,” Forum 27 (1899): 564–69.Google Scholar

5 Carroll, Henry K. (special commissioner for the United States to Puerto Rico), Report on the Island of Porto Rico (Washington, 1899), 776.Google Scholar Free trade was proclaimed on 25 July 1901. This and other benefits to planters of United States control are discussed in Hollander, Jacob, “The Finances of Porto Rico,” Political Science Quarterly 16 (1901): 553–79.CrossRefGoogle Scholar

6 Kemmerer, Edwin W., Modern Currency Reforms (New York, 1916), 203–9Google Scholar details the process of conversion and points to some inadequacies. Official reports of the exchange may be found in House Document 2, Annual Reports of the War Department for the Fiscal Year Ending June 30, 1900; Report of the Military Governor of Porto Rico, 56th Cong., 2d sess., 171–74, and Senate Document 79, First Annual Report of Charles H. Allen, Governor of Porto Rico, 1900–1901, 57th Cong., 1st sess., 64–67.

7 Kemmerer, Modern Currency Reforms, 178–202. Carroll, Report on the Island of Porto Rico, 450–98, contains the text of hearings with dozens of Puerto Ricans regarding the currency values.

8 Kemmerer, Modern Currency Reforms, 220–24; Santiago Pantin, Iglesias, Luchas Emancipadoras (San Juan, 1929)Google Scholar, cited in de Santiago, Carmen Ramos, El Gobierno de Puerto Rico (San Juan, 1979), 68.Google Scholar

9 Kemmerer, Modern Currency Reforms, 223.

10 Ibid., 211 and passim.

11 The confusion over the Philippine currency situation and debate over a solution is reflected in reports and letters in file 808/3–86, Records of the Department of War, Bureau of Insular Affairs, Record Group 350 (hereafter cited as RG 350), National Archives.

12 Documents associated with Conant's appointment and credentials are in file 3197/-, I, RG 350. Healy, United States Expansion, devotes one chapter to Conant.

13 Conant, Charles A., “The Economic Basis of Imperialism,” reprinted in The United States and the Orient (Boston, 1900).Google ScholarLanger, William L., The Diplomacy of Imperialism, 2 vols. (New York, 1935), 1: 68Google Scholar, asserts that what became the “Marxian” interpretation of imperialism started “perhaps with Charles A. Conant.” See also Etherington, Norman, Theories of Imperialism: War, Conquest, and Capital (London, 1984)Google Scholar, for a fascinating discussion of how the policy prescriptions of Conant and other turn-of-the-century American capitalist theorists were adapted by Hobson, and then Lenin, and ultimately became the basis of a Marxist view of the historical origins of imperialism.

14 Healy, United States Expansion, 194–209.

15 Full accounts of the theory and implementation of the gold-exchange system, reflecting the perspectives of its designers, are in Charles Conant, “The Currency System of the Philippine Islands,” in House Document 144, U.S. Commission on International Exchange, Stability of International Exchange: Report on the Introduction of the Gold Exchange Standard into China and other Silver-Using Countries, 58 Cong., 2d sess., 392–422; Kemmerer, Modern Currency Reforms, 245–388; and Luthringer, George F., The Gold-Exchange Standard in the Philippines (Princeton, 1934).Google Scholar

16 The acuteness of the currency problem is detailed in the correspondence between Elihu Root (secretary of war) and Judge Wright, Jan.-June 1902, in file 808/87–95, RG 350, and William Howard Taft to Root, 5 Feb. 1903, file 808/131, RG 350.

17 Correspondence between Conant and Colonel Clarence R. Edwards, Dec. 1901 to March 1902, file 3197/15–43, RG 350, details Conant's lobbying on behalf of the bill. The quotation is from a letter from Conant to Edwards, 3 Jan. 1902, file 3197/17, RG 350.

18 The problems are described in Jenks to Root, 23 Jan. 1904, file 808/205, RG 350.

19 Edwards to Conant, 24 April 1903, file 3197/47, RG 350; correspondence between Edwards and Hollander, May 1902, file 5317, RG 350.

20 Jacob Schiff to Root, 24 April 1903, file 5317/-, RG 350; Conant to Edwards, 25 April 1903, file 3197/48, RG 350.

21 Documents relating to Kemmerer's appointment are in file 7571, RG 350.

22 Various memoranda, 1904, file 808/2, 175–205, RG 350, detail implementation. The Bureau of Insular Affair's objection to the term “conant” is described in Edwards to Taft, 12 Aug. 1903, file 808/177, RG 350. Kemmerer's own records relating to the currency reform are in boxes 278 and 279, Philippine Islands, and box 170, Philippines Currency Reform, Edwin W. Kemmerer papers, Princeton University.

23 Although the gold-exchange currency functioned well for a few years, a number of banking and reserve-fund changes later caused havoe in the system. For the subsequent evolution of the Philippine currency system see Luthringer, Gold-Exchange Standard in the Philippines; Stanley, Peter, A Nation in the Making: The Philippines and the United States, 1899–1921 (Cambridge, Mass., 1974), 239–48CrossRefGoogle Scholar; and Jenkins, Shirley, American Economic Policy Toward the Philippines (Stanford, 1954).Google Scholar

24 Pletcher, David, “The Fall of Silver in Mexico, 1870–1910, and Its Effect on American Investments,” Journal of Economic History 18 (1958): 3355CrossRefGoogle Scholar, has a good analysis of the effects of the fall of silver in Mexico.

25 Kemmerer, Modern Currency Reforms, 467–547, analyzes the problem.

26 M. de Azpiroz (Mexican ambassador to the United States) to John Hay (secretary of state), 15 Jan. 1903, and Sheu Tung (Chinese chargé) to Hay, 19 Jan. 1903, in U.S. Commission on International Exchange, Stability of International Exchange, 38–43.

27 Ibid., 99.

28 Instructions to Commission, 21 April 1903, file 7375/3, RG 350; and Hay to Conant, 21 April 1903, Record Group 59 (hereafter cited as RG 59), Records of the Department of State, National Archives. (If the document preceeds the use of the numerical or decimal filing system, which began in 1906 and 1910 respectively, the date will be a sufficient citation. If the document is after 1906, the date will be followed by a file and document number.) See also the rationale in Hay to Roosevelt, 13 Dec. 1903, in U.S. Commission on International Exchange, Stability of International Exchange, 9–10. American trading interests showed broad support for and interest in the commission's goals. See editorials from the New York Sun, Wall Street Journal, Boston Herald, Philadelphia Inquirer, Sioux City Journal, Chicago Post, Buffalo Express, Providence Journal, New York Times, New York Tribune, New York Journal of Commerce, Dun's Review, New York Banker's Magazine, Bradstreets, Financial Chronical, in ibid., 482–507. This impressive list of favorable editorials also reflects Conant's skill at marshaling publicity.

29 The arguments submitted to and formal agreements of support from foreign governments are in ibid., appendixes B and C.

30 U.S. Commission on International Exchange, Report on the Introduction of the Gold-Exchange Standard into China, the Philippine Islands, Panama, and Other Silver-Using Countries (Washington, 1904), 2223.Google Scholar

31 Ibid., 313–31.

32 John Barrett (U.S. minister to Panama) to Hay, 4 April 1905; W. F. Sands (chargé to Panama) to Hay, 23 Feb. 1906, and F. B. Loomis (acting secretary of state) to Sands, 12 June 1905, RG 59.

33 E. F. Ladd (treasurer of Cuba) to adjutant general, 16 April 1900, file 87/8, RG 350.

34 Military order no. 123, 28 July 1899, file 72/25, RG 350, established official exchange rates between gold-based and silver currencies.

35 Conant to Hay, 20 April 1903; Hanna to Hay, 18 Oct. 1903; and H. G. Squiers (minister to Cuba) to Hay, 9 Nov. 1903, RG 59. Loomis to Conant, 24 Nov. 1903, RG 59, encloses the Cuban government's official reply.

36 Squiers to Hay, 31 May 1904, RG 59.

37 Leonard Wood to Edward Atkins, 5 June 1901, file 72/4, RG 350.

38 Conant's proposals for Cuba are in Conant to Edwards, 12 March 1907, file 72/17, RG 350, and 13 April 1907, file 72/21, RG 350. Conant also tried to win support for Cuban currency reform by taking the matter up with the State Department, Conant to Root, 15 March 1907, file 5383/-, RG 350; and with President Taft, Conant to Taft, 25 July 1907, file 72/22, RG 350; and by publishing “Our Duty in Cuba,” North American Review 185 (May 1907): 141–46. Conant wanted a job as Cuban financial adviser; Conant to Major Frank Mclntyre (acting chief. Bureau of Insular Affairs), 22 Aug. 1907, file 72/23, RG 350. Jenks's support of Conant's proposal is in jenks to Edwards, 13 Feb. 1907, file 72/11, RG 350. Magoon's rebuttal is in Magoon to secretary of war, 16 Aug. 1907, file 72/24, RG 350, (quote p. 13). The BIA decided to do nothing about the currency situation; Edwards to Magoon, 25 Feb. 1908, file 72/14, RG 350. Gradually over the next ten years U.S. money came to dominate the currency of the island without the necessity of any sudden change. For a broader view of American economic policy in Cuba during this period see Benjamin, Jules R., The United States and Cuba, 1880–1934 (Pittsburgh, 1977).Google Scholar

39 Lewis, Cleona, America's Stake in International Investments (Washington, 1938); 590.Google Scholar

40 Conant's renewed efforts (in 1910) are reflected in various correspondence, April-May 1910, 837.51/ 115–120 RG 59.

41 Kemmerer, Modern Currency Reforms, 519–37; Senate Document 493, Charles Conant, The Banking System of Mexico, 61st Cong., 2d sess., 63–76. The text of the Mexican monetary law is in U.S. Department of State, Papers Relating to the Foreign Relations of the United States (Washington, 1867-), 1905: 656–57.Google Scholar

42 The advancing price of silver in 1906 undermined the new currency of the Philippines too, and the War Department again called in Jenks and Conant to suggest a remedy and to coordinate a response with Mexico. Mexico agreed to sell silver to keep the price below Philippine parity until the conants could he recoined, reducing their silver content. The U.S. government's coordination of monetary policy between Mexico and the Philippines is in Jenks to Root, 20 Nov. 1905 and 25 Nov. 1905, RG 59.

43 Hay to E. H. Conger (minister to China), 12 Oct. 1903, RG 59.

44 The dispute over indemnity payments began in 1903 when all parties to the Boxer treaties, except the United States, temporarily refused to accept payment in silver. See Conger to Hav, 3 Jan. 1903 and 5 Dec. 1904, HG 59.

45 Jenks' formal instructions and the commission's six-point plan for Chinese currency reform, including a provision for “acceptable foreign experts,” is in Hay to Jenks, 24 Oct. 1903, RG 59. All official documents relating to the goals and recommendations of the Commission are in U.S. Commission on International Exchange, Report on the Introduction of the Gold Exchange Standard into… Silver-Using Countries, 75–278.

46 Loomis to Hanna, 16 Feb. 1904, RG 59.

47 Root to Roosevelt, 10 Aug. 1903, file 7375/14, RG 350.

48 Edwards to Taft, 8 Oct. 1903, file 7375/19, RG 350.

49 Jenks to Hay, 30 March 1904, RG 59.

50 Conger to Hay, 14 Nov. 1904 and 26 Nov. 1904, RG 59.

51 Enclosures in Conger to Hay, 26 Nov. 1904 and Jenks to Hay, 8 June, 1905, RG 59. Jenks also attributed his failure to opposition bv Russian and British banking interests in China. Jenks to Hay, 8 March 1904, file 7375/28, RG 350.

52 As a reaction against Jenks's proposal, the viceroy of Hunan and Hupeh (Jenks's leading critic) obtained the emperor's approval to replace Mexican silver coin in his district with a new silver coin, the tael. He argued that China should have its own national coin, just as other nations had, and that gold-standard coin would benefit only foreigners. See the enclosures in Conger to Hay, 26 Nov. 1904. The tael then became the basis for the Chinese monetary reform law of 1905, establishing the coin as the basis of a uniform national coinage consisting of gold, silver, and copper coins whose face values were to correspond to the intrinsic value of the metals contained. The reform of 1905 thus reflected the intrinsic-value theories of money that Jenks had argued against. Rockhill to Root, 29 Sept. 1905, and 11 Dec. 1905, RG 59. The text of the monetary reform of 1905 is in Foreign Relations, 1905: 184–95.

53 The official report of the Commission is U.S. Commission on International Exchange, Stability of International Exchange, 11–36.

54 Documents relating to this scandal are in correspondence between Hollander and Knox, June 1911, 839.51/727, RG 59. The text of the Dominican Republic's Gold Standard law of 1905 is in Department of State, Foreign Restions, 1905: 412–13.

55 The State Department allowed Conant and his employer, Brown Brothers, to use official wires to conduct their negotiations with the government of Nicaragua for a loan and currency reform. This correspondence from late 1911 to early 1912 is enclosed in 871.516/5, RG 59. The program for monetary reform may be found in the agreement between the bankers (Brown Brothers and Seligman) and the government of Nicaragua, March 1912, enclosed in Brown Brothers to the secretary of state, 3 April 1913, 817.515/8, RG 59.

56 On the development of professionalism in economics see Furner, Mary O., Advocacy and Objectivity: A Crisis in the Professionalization of American Social Science, 1865–1905 (Lexington, Ky., 1975).Google Scholar There is a burgeoning literature on turn-of-the century professionalism. Leading general studies are Haskell, Thomas L., The Emergence of Professional Social Science (Urbana, III., 1977)Google Scholar; Bledstein, Burton J., The Culture of Professionalism: The Middle Class and the Development of Higher Education in America (New York, 1976)Google Scholar; Larson, Magali Sarfatti, The Rise of Professionalism: A Sociological Analysis (Berkeley, Calif., 1977)Google Scholar; and Haskell, Thomas L., ed., The Authority of Experts: Studies in History and Theory (Bloomington, Ind., 1984).Google Scholar

57 Two of Conant's major works advocating the gold-exchange standard were The Principles of Money and Banking, 2 vols. (New York, 1905) and “The Gold Exchange Standard in the Light of Experience,” Economic Journal 19(1909): 190–200. Wiebe, Robert H., The Search for Order, 1877–1920 (New York, 1967)Google Scholar describes the intellectual setting into which Conant's views fit.

58 Conant's activities on behalf of currency reform for these countries are in Conant to Root, 15 July 1908, 14280/1, RG 59, Conant to Knox, 15 Sept. 1909, 2112/88, RG 59; Conant to Knox, 27 Sept. 1909, 21810/-, RG 59; Conant to Knox, 12 Dec. 1909, 21810/4, RG 59; Conant to Knox, 1 Feb. 1910, file 18222/23, RG 59; Conant to Huntington Wilson, 9 March 1910, 21810/3, RG 59; and Adee to Conant, 24 Oct. 1910, 818.51/19a, RG 59. See also note 40.

59 Jenks to Kemmerer, 15 Oct. 1928, China Correspondence, box 23, Kemmerer papers.

60 Documents relating to Jenks's role in Nicaragua, especially in 1925, are in 817.51/1363, 1473, 1562a, 1577, 1597–9, RG 59.

61 Dalgaard, Bruce, “E. W. Kemmerer: The Origins and Impact of the ‘Money Doctor's’ Monetary Economics,” in Variations in Business and Economic History: Essays in Honor of Donald L. Kemmerer, ed. Dalgaard, Bruce and Vedder, Richard (Greenwich, Conn., 1982), 3144.Google Scholar There were no other specialists in foreign currency reform; in 1920, when the State Department was seeking experts in this field and asked Kemmerer for suggestions, he replied that the only experts in the country were Conant (then dead), Jenks, and himself. Kemmerer to Leo Rowe, 8 May 1920, letters: Nov. 1919 to June, 1920, Kemmerer papers.

62 Conant always sent his major articles and books to State Department officials in an attempt to educate them about international exchange. See, for example, Conant to Huntington Wilson, 9 March 1910, 21810/3, RG 59.

63 His disparaging views of bankers are expressed in the letter referenced in note 62.

64 Conant, Principles of Money and Banking 1:348–49. See also Charles Conant et al., “The Influence of Falling Exchange upon the Return Received for National Products,’ in U.S. Commission on International Exchange, Stabilization of International Exchange, 431–39.

65 Conant, Principles of Money and Banking, 1:402.

66 Ibid., 403.

67 Ibid., 399.

68 Kemmerer and Jenks refined their economic views over the fine points of currency reform in a lengthy correspondence between 1903 and 1906, when Kemmerer was at work in the Philippines and Jenks was involved in the Commission on International Exchange's work in Mexico and China. See Philippine Islands: letters, box I, general, 1903–6, Kemmerer papers. Kemmerer's economic views are subsequently reflected in the recommendations of his many advisory commissions to foreign governments during the 1920s and in many later books on economics, especially Gold and the Gold Standard (New York, 1944). All his reports and other writings are contained in his papers.

69 Kemmerer, Edwin W., “Economic Advisory Work for Governments,” American Economic Review 17 (March 1927): 112Google Scholar; Seidel, Robert N., “American Reformers Abroad: The Kemmerer Missions in South America, 1923–31,” Journal of Economic History 32 (June 1972): 520–45CrossRefGoogle Scholar; and Dalgaard, “E. W. Kemmerer.”

70 The theoretical incompatibility in the early twentieth century of domestic reserve policy and the requirements of the international gold standard are developed in West, Robert Craig, Banking Reform and the Federal Reserve, 1863–1923, (Ithaca, N.Y., 1977), 170–72; 178.Google Scholar

71 Dalgaard, Bruce R., South Africa's Impact on Britain's Return to Gold, 1925 (New York, 1981).Google Scholar

72 Both Conant and Kemmerer had connections to American banking interests, however. Conant served as treasurer of Morton Trust, which held funds for the governments of the Philippines, Panama, and the Dominican Republic, after their currency reforms were effected. See correspondence between Conant and Edwards, Jan. to May, 1906, file 14077/- to 9, RG 350 (Philippines); Sands to Root, 9 Feb. 1906, RG 59 (Dominican Republic); Hollander to Adee, 24 Sept. 1906, file 1199, RG 350 (Dominican Republic). Later Conant was employed by Brown Brothers in Nicaragua. The citations in note 58 indicate that Conant was also working with Speyer and Company and other investment bankers. Kemmerer maintained a consulting arrangement with Dillon and Read from 1924 to 1929. He received an annual retainer of $3,000 for the benefit of his “advice and cooperation” in foreign matters. Kemmerer qualified this arrangement by the reservation that should he enter the employ of any foreign government, his obligation to the bank would terminate during that period and for sixty days thereafter. Correspondence between Robert O. Hayward (of Dillon and Read) and Kemmerer, 7 Nov. 1923 and 3 Jan. 1924, letters, July 1924 to April 1925 (unnumbered box); and Hayward to Kemmerer, 27 Nov. 1925, Chile, 1926: letters, box 61; and Kemmerer to Dean Mathey (of Dillon and Read), 9 Nov. 1929, China: correspondence, box 28, Kemmerer papers.

73 There are excellent studies of European stabilization in the 1920s. See Clarke, Stephen V. O., Central Bank Cooperation: 1924–31 (New York, 1967)Google Scholar; Meyer, Richard H., Banker's Diplomacy: Monetary Stabilization in the Twenties (New York, 1970)Google Scholar; Leffler, Melving, The Elusive Quest; America's Pursuit of European Stability and French Security, 1919–1933 (Chapel Hill, N.C., 1979)Google Scholar; Costigliola, Frank, “Anglo-American Financial Rivalry in the 1920s,” Journal of Economic History 37 (Dec. 1977); 911–34CrossRefGoogle Scholar; Schuker, Stephen A., The End of French Predominance in Europe (Chapel Hill, N.C., 1976)Google Scholar; Silverman, Dan P., Reconstructing Europe after the Great War (Cambridge, Mass., 1982)CrossRefGoogle Scholar; and Trachtenberg, Marc, Reparation in World Politics: France and European Diplomacy, 1916–1923 (New York, 1980).Google Scholar

The efforts to stabilize economies and spread the gold standard outside Europe, by contrast, have received little attention from economic historians. The few studies include Seidel, “American Reformers Abroad” Dalgaard, South Africa's Impact on Britain's Return to Gold, 1925; Dalgaard, Bruce R., “Monetary Reform, 1923–30: A Prelude to Colombia's Economic Development,” Journal of Economic History 40 (1980): 98104CrossRefGoogle Scholar; and Kemmerer, Donald L. and Dalgaard, Bruce R., “Inflation, Intrigue and Monetary Reform in Guatemala. 1919–1926,” Historian 66 (Nov. 1983): 2138.CrossRefGoogle Scholar Paul Drake's unpublished manuscripts on the Kemmerer Commissions in South America provide the most thorough treatment of the impact of stabilization programs outside Europe.