AMERICAN POLICY IN CHINA, 1899—1912:

‘A.TEST CASE FOR THE ECONOMIC INTERPRETATION OF IMPERIALISM

BY

Joan H. Rich

A THESIS

Submitted to
Michigan State University
in partial fulfillment of the requirements
for the degree of

MASTER OF ARTS

Department of History

1962

Professor Paul A. Varg by his sound advice and
encouragement has contributed immeasurably to
the writing and development of this thesis, for

which I would like to express profound gratitude.

ii

TABLE OF CONTENTS

Chapter Page
I. THE PROBLEM . . . . . . . . . . . . . . . . . 1

II. THE CONTEMPORARY AMERICAN VIEW OF CHINA . . . 37
III. AMERICA'S ECONOMIC STAKE IN CHINA . . . . . . 64
IV. JOHN HAY AND THE FAR.EAST . . . . . . . . . . S4

V. THEODORE ROOSEVELT . . . . . . . . . . . . . . 128

VI. TAFT, THE BANKERS AND CHINA . . . . . . . . . 167
CONCLUSION . . . . . . . . . . . . . . . . . . . . . . 212
BIBLIOGRAPHY . . . . . . . . . . . . . . . . . . . . . 217

iii

ABSTRACT

AMERICAN POLICY IN CHINA, 1899-1912:
A TEST CASE FOR THE ECONOMIC INTERPRETATION OF IMPERIALISM

by Joan H. Rich

The view that imperialism is caused by the economic
pressures that develop in the capitalist system when it
reaches the stage of monopoly and that financial interests
are the controlling power behind expansion was first
expressed by J. A. Hobson in his book Imperialism: A Study.
To maintain a balanced economy, Hobson believed, a capitalist
nation needed to export surplus goods or surplus capital.
Nikolai Lenin, in his Imperialism, went even further than
Hobson by maintaining that imperialism was an inevitable
development of capitalism and could not be prevented by
reforms in the capitalist system. This economic interpretation
of imperialism has found many adherents among historians,
and a number of books have been written to apply the theory
to historical events.

America entered an age of expansion at the end of
the nineteenth century, and, in the View of these historians,
her policy in the Far East offered much evidence to support

the economic interpretation of imperialism. A closer lodk

Joan H. Rich

at this evidence shows that the formation of American
policy had far more complex origins. America's interest

in China was in part the outcome of an ideology that paid
little attention to economic benefits. Many Americans saw
the world in terms of a number of competing civilizations

of which only the fittest would survive. American democracy
and Anglo-Saxon civilization were at stake in China as the
civilizations of the East and the West were brought into
closer contact by the new means of communication. Questions
of national prestige and military strategy were also involved.
As a result of this outlook American statesmen came to
regard the maintenance of the integrity of China and a
balance of power in the Far East as vital to America's
national interest.

At the time America became interested in China she
in fact had few investments in China and little surplus
capital to invest there. Her trade with China, with the
exception of manufactured cotton goods, was of minor
importance.

/The open door policy was inaugurated in the belief
that America could act in her own self-interest to gain
economic benefits at the same time that she worked for the

llong range goal of upholding the territorial and administrative

 

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Joan H. Rich

integrity of China. It was assumed that there was nothing in-
compatible in the two aims.

During Theodore Roosevelt's term in office the problem
of Japanese relations temporarily eclipsed the effort to
support China against the encroachments of other powers,
and Roosevelt was reluctant to assume any political commitments
that America could not or would not defend.

The open door policy was revised by his successor
to include the concept of equality for financial investment,
but the purpose remained the same-~to uphold the integrity
of China. This revival of concern about China was the result
of the efforts of European nations to gain concessions for
railway loans to China and the increasing weakness of the
Chinese government. The Taft administration also believed
that it could help American business at the same time that
it strengthened China against encroachment.

In these early years as a world power, America still
had much to learn about the importance of power in world
affairs, and still had not precisely defined her national
interests. The country was not yet ready to support
political alliances or military adventures abroad. States-
:men tried to play a power game with only economic weapons and

in the end these proved to be ineffective.

CHAPTER I

THE PROBLEM

The term "imperialism" has no precise definition, and
yet it is a term freely used in almost every discussion of
contemporary international relations. Historians likewise
apply the term to a whole range of phenomena ranging from
territorial expansion to foreign investments and to efforts
to promote trade. This lack of precise meaning makes the
term a poor tool of communication, but the emotional conno—
tation now associated with it renders it even more unsatis-
factory. Marxists and many non-Marxists equate the word
with a sinister drive to dominate other peoples and assume
that this desire for domination is the product of economic
forces.

This definition of the term "imperialism" began
with the publication of J. A. HObson's highly influential
.Imperialism: A Study,1 published in 1902, and received
further impetus in 1916 with the publication of Nikolai
Lenin's Imperialism,2 which drew heavily on Hobson, and
studies by Rudolf Hilferding, Karl Kautsky and other

neo—marxists.

 

lLondOn. 1948 0

2New York, 1939.

All these studies were efforts to explain the
unprecedented expansion by the European Powers that took
place at the end of the nineteenth century. Both Hobson
and Lenin saw a qualitative difference between the
aggression of the late nineteenth century and earlier
expansion. Hobson made the distinction between colonialism,
the settlement in new areas of people of the mother country
(such as the American colonies), and imperialism, the effort
to absorb a distant territory of reluctant and unassimilable
people. Colonialism, he said, could be an extension of
nationalism, whereas imperialism was a perversion of it and
defeated any movement toward internationalism. Hobson noted
that the nineteenth century differed from earlier periods
in that imperialism had become a conscious policy of
government, and that the world was divided among a number of
competing empires.

Lenin also found the nineteenth century imperialism
essentially different from previous imperialism, although
he did not make clear the distinction between colonialism

and imperialism as did Hobson. He called imperialism an

 

3Hobson, pp. 6—11, 8, 19. These differences were
also noted by Paul S. Reinsch, World Politics at the End of
the Nineteenth Century as Influenced by the Oriental Situation
(New York, London, 1925), pp. 13, 61-67. See below, Chapter
II.

expression of a certain phase of capitalism that was dis-
tinguished by the dominance of monopoly and finance capital.

It was a transition from colonialism, whereas previous aggression,
which he also called imperialism, was the result of free
enterprise capitalism. Disagreeing with Hobson and Kautsky,

he insisted that imperialism was a necessary expression of

the capitalist system, not a conscious policy of government.

On the whole Lenin was not very precise in his definition

of imperialism.

Hobson's analysis of imperialism was based almost
entirely on the history of the British Empire. He wanted to
prove that Britain's deliberate policy of expansion adopted
in the 1890's was financially ruinous to the country,
undermined her domestic institutions, and threatened to
involve her in war. He sought to find the reason she continued
such a disastrous policy, for he assumed that governments
always acted on some rational principle. As Hebson saw it,
the answer lay in the fact that while the policy was
disastrous to the country as a whole, it was exceedingly
profitable to a powerful minority who were able to bring

decisive influence to bear on government policy.

 

4Lenin, pp. 76, 88, 90-95; E. M. Winslow, The Pattern
of Imperialism (New York, 1948), pp. 183-88.

He explored the usual reasons given for imperialist
policy and found them wanting. He proved that the areas
annexed by Britain after 1870 were not profitable centers of
trade because little trade was gained that Britain would not
have had in any case; and that the trade of these areas was
a very small proportion of the total trade of the nation,
although the colonies might furnish a few critical imports
unobtainable in other regions. For the nation as a whole
colonies were uneconomical because the expense of running
them ate up any profits they might provide. Trade was
therefore not the principal reason for acquiring colonies.5

Hobson also rejected the theory that colonies were
acquired for philanthropic reasons, to spread the benefits
of British government and civilization, because as he
pointed out, Britain's colonies were ruled autocratically
from London.6

Finally he pointed out that these new territories
were not needed as outlets for excess population because
most of them had climates unfit for European settlers and

‘were already well populated by natives. In any case, Britain

 

5Hobson, pp. 28-40.

6Hobson, pp. 26, 113-24.

was not overpopulated.7

But if Britain herself did not profit from overseas
expansion, there were powerful vested interests in the country
that did profit greatly from colonial trade and the new
opportunities colonies provided. In the matter of trade,
there were some industries that found a greater margin of
profit in selling overseas than in the home market even
though the home market might have absorbed a larger volume
of goods. Among the industries that profited were the arms
industries, tools, textiles, hardware, those supplying
railway equipment and other public works. All of these were
large, organized industries apt to be influential with
government.

Among the individuals who profited were those who
had jobs at stake in the new countries, civil servants,
teachers, engineers, missionaries, in other words men
who had not the same outlet for their talents at home. It
was again significant that those men who had a vested
interest in colonial jobs tended to be men who had close

ties in government circles. Finally the military had a

 

7H0bson, pp. 27, 42—43.

8Hobson, pp. 46-51.

vested interest in expansion. None of these vested interests,
however, might have been decisive in formulating policy if

it were not for the changes going on in the economy which
tended to concentrate great power in a few hands.

Hobson drew attention to the great trusts and
monopolies that had developed as protection against the cut—
throat competition of free enterprise in a rapidly expanding
economy. The trusts put great wealth in the hands of a few
men, and since the wealthy could not spend all their money
on consumption, they were forced to save most of it. These
savings could not be profitably invested in the domestic
economy under the condition of trusts. The surplus savings
could therefore be used either to produce more than the
domestic economy would absorb but which could be marketed

overseas as "surplus goods,’ or the savings themselves could
be invested abroad as “surplus capital." In either form,

it was the excessive saving that created a disequilibrium
in the domestic economy and forced attention abroad. It
was the profitableness of overseas investment that was the
moving force behind imperialism. HObson found support for
this theory in the figures that showed that, whereas trade

as a whole did not grow significantly within the British

Empire as new lands were acquired, there was a large and

7
significant increase in overseas financial investment, which
yielded far greater profit than domestic investment.9

According to Hebson, all American economists agreed
that the United States was overproducing, and this belief
'was widely reflected among publicists, statesmen and business—
men of the period.10 Since, as Hebson pointed out, all the
European nations were reaching the point of overproduction,
the competition for overseas markets and outlets for investment
was growing increasingly intense.

Hobson was the first to define the role of finance
capital in imperialist expansion. The financiers, as the
dealers in investment, were the principal advocates of
imperialism. The individual investors, even the heads of
large trusts, were the "catspaws" of these men.

United by the strongest bonds of organization,
always in closest and quickest touch with one
another, situated in the very heart of the business
capital of every State, controlled, so far as
Europe is concerned, chiefly by men of a single

and peculiar race, who have behind them many
centuries of financial experience, they are in a

unique position to manipulate the policy of
nations.11

 

9Hobson, pp. 73-88, 52-56.

OHobson, p. 76; Brooks Adams, America's Economic
Supremacy (New York, 1947). PP. 71, 79, passim; Charles S.
Campbell, Jr., Special Business Interests and the Open
Door Policy (New Haven, 1951), pp. 1-4.

llHobson, pp. 56—57.

 

Hobson noted that once investments had been made
abroad, the government often stepped in to protect the
investment; outright territorial acquisition often followed
political intervention. In this way government took over
the risk of private investment but the profit stayed in
private hands. The nation did not benefit, but the influential
few did.

Even worse than this manipulation of government
support for private gain was the financier's use of stocks
and bonds, not as sources of income in themselves, but as
means for speculation in the international money market.12
In this way the whole economy of Britain became tied up with
foreign investment through the manipulation of private
financiers.

Hobson differed from Lenin primarily in believing
that imperialism was not an inevitable development from
capitalism. If the capital accumulation, instead of going
into enforced saving, were more widely distributed in
higher wages or taxes to the community, he argued, it could
find release in consumption rather than in overseas investment;
and if competition were kept free and trade barriers lowered,

lower prices would induce a wider domestic market. Social

 

12Hobson, pp. 56-61.

reform was therefore the necessary corrective to imperialism.
Hobson explained the ways in which imperialists impeded
these reforms at home, and how the administration of the
empire congested the machinery of government and further
impeded reform.l4

Hobson believed that any reasons for advocating
imperialism other than the economic were ideological fronts
for the financiers' search for gain. He analysed and
disposed of all the contemporary defenses of imperialist
policy. His lengthy attack on the Social Darwinist explan-
ation of national rivalry and imperialism was particularly
significant because it suggests that it was a widely held
view Which was with many people perfectly sincere, although
in Hobson's opinion completely illogical.15 Hobson was
ready to concede that there were some people who were
genuinely concerned to ”do good,9 to bring western civili-
zation, religion or education to badkward people, but he

felt that many of these were unconscious hypocrites, and

-others the tools of business interests who played on

 

l3Hobson, pp. 81-93.
14Hobson, pp. 125—52.

15Hobson, pp. 153-95; William L. Langer, The Diplomacy
of Imperialism (New York, 1951), pp. 88-94.

 

10

philanthropic impulses. ’Vague, well—meaning phrases had
become the cloak for deliberate exploitation of backward
areas.’ The imperialists also played on the deeper instinctive
fears and impulses of their compatriots, such as the desire
for land, fear of other races, nationalism and pure aggressive-
ness. Hobson thus relegated to a secondary role a number
of explanations for imperialism.Which later theorists have
regarded as primary. The Marxists too have tended to regard
all other theories as intellectual camouflage for materialist
interests.16

After reviewing England's relations with some of the
native populations of her Empire, Hobson turned to the question
of China, which he, in company with many of his contemporaries,
saw as the last great open market and field of international
rivalry. He felt that China would be too large a bite for
the powers to swallow, and that cooperation between financial
interests of the imperialist countries was a more likely
development than conflict. This seemed indeed to forecast
Ithe international consortium of a few years later. .Hobson
had this to say about American policy: ”The United States,
whose interest in China for investment and for trade is

developing faster than that of any European Power, will

 

l6Hobson, pp. 197-222; Lenin, p. 84; Winslow, pp. 223-36.

11

certainly insist upon an open door and will soon be in a
position to back her claim by strong naval power."l7 Hobson
was greatly concerned about the possible breakup of China
and the loss of her valuable civilization, and like many
other commentators hoped for a judicious interchange of
cultural values.

Hobson allowed greater scope than Lenin did for the
interplay of economic and non-economic forces in international
affairs. He was also more hopeful that domestic reform would
lead to a more equitable distribution of income and that
international reform to establish some sort of referee in
the relations of the civilized and backward nations would
put an end to the aggressive tendencies of the day. He
put the major blame for deliberate imperialism on the inter-
national businessman, financier and speculator, and on the
prevalent assumption that a government must protect the
interests of any individual citizen regardless of the over-
all national interest.18 This was a point widely taken up
by historians who adopted the "economic interpretation."

In Lenin's view, imperialism was the inevitable out—

' come of the capitalist system, it was the last stage of

 

l7Hobson, p. 310.

18Hobson, pp. 41-42, 228-37, 356-60.

12

capitalism. Following Marx's line of reasoning, he maintained
that the development of trusts and monopolies was the inevitable
result of a free enterprise economy, and he cited evidence to
prove that the stage of monopoly capital had been reached by
1916. Monopoly had also extended into the banking industry,
and this was a fundamental step in the transformation of
capitalism into capitalist imperialism. The banks ran the
industrial world, and since their largest profit came from
floating new companies, speculation and manipulation of the
money market, their control penetrated every sphere of public
life, regardless of the form of government. A central elite
drawn from government, industry and banking ruled each
capitalist country. Just as this elite had evolved in each
nation, a few powerful capitalist nations had arisen to
dominate the world.19

By a line of reasoning similar to Hobson's, Lenin
maintained that surplus capital had to seek outlets abroad.
”but to him this was inevitable. VAs long as capitalism
.remains what it is, surplus capital will never be utilized

for the purpose of raising the standard of living of the

masses in a given country, for this would mean a decline in

 

19Lenin, pp. 20, 31, 53-59, passim.

13

profits for the capitalists."20 The export of capital re-
placed the export of goods, and financial capital gradually
spread over the whole world. This development was dominated
by the powerful nations.

"As the export of capital increased, and as the
foreign and colonial relations and the 'spheres of influence'
of the big monopolist combines expanded, things 'naturally'
gravitated towards an international agreement among these
combines, and toward the formation of international cartels,"
Lenin argued.21 However, he saw no hope, as Kautsky had
done, that such international agreements would replace the
competition and bring peace. They were merely a change in
the form of the struggle. The financiers would always seek
control of the markets for surplus goods and surplus capital
and of their sources of raw material as the best way to
defeat their rivals in other nations.22

Since loans abroad were usually tied to some form of
concession, these loans involved political considerations
and brought an intensification of colonial expansion.

Political division of the world therefore inevitably followed

 

20Lenin, p. 63.
21Lenin, p. 68.

22Lenin, p. 83.

14

the economic division by the cartels.23

According to Lenin the economic forces were inexorable.
He assumed that men always acted according to the profit
motive. Thus it followed that "the capitalists divide up
the world, not out of any particular malice but because the
degree of concentration which has been reached forces them
to adopt this method in order to get profits."24 Monopoly
was an inevitable outgrowth of free enterprise, and imperialism
the inevitable outgrowth of monopoly. Capital had to seek
outlets abroad because it could not be utilized in the
domestic market without loss of profit. This infallible
rule meant that no reforms seeking a return to free competition
and free trade could permanently reverse the trend.

By placing exclusive emphasis on the inevitability
of economic forces Lenin's theory is far less subtle than
Hobson's, which found room for non-economic forces in the
total scheme of imperialism. The simplicity of his scheme
may partly explain why Lenin's views became established as
communist dogma, and reinforced the tendency among historians
to regard economic causes as basic to history, although one
finds fewer echoes of his specific arguments than those of

Hobson in the works of American historians.

 

23Lenin, pp. 89-90.

24Lenin, p. 75.

15

Whatever the merits of Lenin's theory as a description
of internal economic development, the essential point for the
study of foreign policy was the assumption that capital must
be exported; that a nation's policy was determined by the
necessity for acquiring outlets for this surplus capital:
and that political aggression followed economic aggression.

Historians have applied the economic theories of
Hobson, Lenin and others to their accounts of political
events, and it became fashionable to regard the holocaust
of the First World War as the folly of imperialists and
financiers.25 The whole aggressive movement of the great
powers from the 18808 on was regarded as part of the inevitable
development of the capitalist system, with the international
rivalries leading inevitably to war. American policy in
China was regarded as a facet of this world-wide imperialist
tendency.

A look at several of these historians who accepted
the economic interpretation, shows the shortcomings of
.applying a theory to the facts rather than deriving the
26

theory from the facts. For example, Parker T. Moon

followed fairly closely Hobson's description of the

 

25Winslow, p. 45.

26Imperialism and world Politics (New York, 1927).

l6

imperialist impulses in Great Britain beginning in the 18805.
As other nations began to catch up to British industrial
development, she no longer held the lead in world markets

and surpluses began to develop at home, particularly in the
key iron and cotton industries. The creation of surpluses

was the "inevitable result of the economic laws governing
capitalist production."27 Since capital could no longer be
invested in these industries, it began to look for outlets
abroad. At the same time the increase of industrialization
required more and more raw materials, and the growing opulence
of Britain created a demand for tropical luxuries. These
were the accepted reasons for needing colonies. Moon likewise
gave great weight to the ideal of national economic self-
sufficiency as a motivating factor in imperialism. Each
nation wanted to control as much as possible the supply of

raw materials for its own economy.

It was not the capitalist class as a whole, Moon
believed, that was interested in imperialism, but only a
minority. This minority included many influential individuals
and was dominated by financial interests. It was supported

by such vested interests as the shipping magnates, the arms

 

27Moon, p. 30.

28Moon, pp. 25-34.

17

industry, the army and navy, segments of the civil service,
missionaries; and publicists played on a variety of ideas

and emotions to gain popular support.29 Moon did not acknow-
ledge his debt to Hobson for these categories or for his
general theory, which is perhaps an indication of how widely
prevalent Hobson's interpretation had become. Moon's
arguments against imperialism in his conclusion also
reflected Hobson's arguments.

Moon discussed briefly the development of imperialist
policy in the European nations, but did not devote a section
to tracing the transformation of American policy to imperial—
ism or spelling out the economic impetus behind American
expansion. He believed that the American expansion across
the continent was not imperialist, but stated that the
expansionist movement at the end of the century had the same
causes as English imperialism.

The theory enabled Moon to reduce the tumultuous
decades prior to 1914 to an orderly and easily understood
drama in which the villain was finance capitalism. In his
brief history of China from 1894 to 1918 he stated that

{imperialism" did not begin until after 1894 when the

 

29Moon, pp. 58-74.

30Moon, pp. 412-13.

18

battle for concessions began. The earlier "commercialism"
often used force but was not a war of conquest. It aimed
at the open door which was the opposite of imperialism.
"But the opening of the Far East led inevitably to a desire
for monopoly of markets, mines, and railway building, hence
for monopolistic 'spheres of influence', and also for naval
bases and in some cases, territory."31’

The control of the railways, he believed, was the
crucial point at issue in China. For example, the Chinese
Eastern Railway, "nominally a private industrial project . . .
was really an imperialist move on the part of the Russian
Government. The railway was first and foremost a strategic
railway to advance Russian imperialist interests in the Far
East,"32 Railroad negotiations were a complex mixture of
business and politics, but ”in most cases the primary factor
was the desire of a group of capitalists to obtain the
diplomatic backing of its own government in order to secure
profitable contracts and to ward off competitors,"33 He

went on:

But the banking concerns competing for Chinese
Railway contracts were less interested in the

 

31Moon, p. 321.

32Moon, p. 333.

33Moon, p. 339.

19

economic welfare of the whole country and ultimate

profitability of the railway system than in the

immediate advantage of obtaining for themselves

big concessions by enlisting diplomatic aid. And

the diplomats readily joined hands with the bankers

and made the gaining of a concession as Lord

Salisbury said, not a pure industrial proposition

but a ”political matter."34

In accordance with his theory, Moon considered
American policy in China largely in economic terms. IThe
Open Door Notes were designed to help American commerce,
35’
"which had grown to large proportions." He did not explain
precisely what moved John Hay to act in support of this
commerce or what the particular trade interests in China
were. Since Hay overlooked the vitally important role of
investment in the struggle in China, later administrations
tried to make good this error. Moon did not see any difference
between America's role in the Boxer negotiations and that
of the other powers. He considered Theodore Roosevelt's
policy one of consenting to Japanese aggrandizement in Korea
in exchange for the safety of the Philippines.36
Moon is unclear in his interpretation of the Knox

Neutralization Proposal and the creation of the banking

syndicate. 0n the one hand he says that Knox "seized upon?

 

34Moon, p. 340.

35Moon, p. 341.

36Moon, p. 347.

20

the Harriman plan for the Chinchow-Aigun railway to put forth
his proposal, suggesting Knox's motive was political. On
the other hand he said the bankers' syndicate was "defeated"
in Manchuria, indicating the purpose was after all financial.
The general implication of the section was that because
bankers were involved in lending money to China, the motives
were sinister.37 However, when Wilson wanted to re-establish
the consortium in 1918, it was because he saw this as "the
best way to prevent China from becoming, through Japanese
loans, a Japanese protectorate."38 Moon regarded the
international consortium as the best method of providing
capital to backward nations without endangering peace.39
Moon's analysis of events tended to follow his theory,
but his imprecision in the use of the term "imperialism”
and occasional vagueness of interpretation left room for
doubt that the theory applied in all cases. With his emphasis
so strongly on economic factors, he tended to disregard
contributing factors. In his discussion of China he believed
the role of the railroad financiers in the development of

spheres of influence was crucial, and neglected the problems

 

37Moon, pp. 366-70.

38Moon, p. 371.

39Moon, p. 536.

21

attendant on the rivalries between the European powers.

Nor did he give any evidence that the statesmen acted under
pressure from financial interests or that helping these
interests was the primary aim of the statesmen themselves.
This was merely assumed on circumstantial evidence.

What is the link between the theory of economic
necessity and the creation of policy by individual statesmen?
It is precisely this policy-making end of the question of
economic determinism that concerned Charles A. Beard in his
bodk, The Idea of National Interest.40 Beard saw the
answer in terms that were essentially psychological. Members
of a political party reflected the views of their supporters.
”Moreover private citizens entering the service of government
do not pass through a personal metamorphasis . . . . They
are bound to bring with them the thoughts, practices and
sympathies of the group in which they have moved in a private
capacity."41 Government acted through the agency of indi-
vidual men, who were prominent either in or out of government
service before they received high posts.

In these circumstances advice given, demands made,

policies formed and choices of action made. by or
under the influence of men ”of affairs and position"

 

40New York, 1934.

41Beard, The:§dea, pp. 116-17.

22

moving in the same environment and associated by
ties of friendship, favor, family, clans and
business relationship, are bound to conform to a
recognizable frame which displays, above all

minor deflections, a consistent unity, a set

of definite characteristics and an unmistakable
bias which is naturally representative and
favorable to the group from which these men,
giving the advice, voicing the demands and

making the decisions have come. Add to it

the fact that the whole operates within a profit
economy characterized by intense competition

for advantage, for raw materials and for markets,
and for legislation, administration and domestic and
foreign actions of public bodies favorable to such
an economy; that men are scarcely actuated in their
practical, private affairs by any other philosophy
of public welfare or private advancement than

that implied by such an economy; and there is but
little question that a distinct pattern of social,
political and economic thought and action is

bound to emerge.42

While true up to a point, this theory assumed a
logic and consistency in men's thinking which did not always
in fact exist; and that a man's outlook in one sphere of
activity would transfer without any essential change to
another. Thus Beard assumed that men would not learn from
or change in a new situation.

With this psychological link to business interests
as the key to the actions of statesmen, Beard traced the
domination of the interests and ideas of big business on

American policy from the 18805 to 1932, when the book was

 

42Beard, The Idea, p. 118.

23

written. In this period some victories went to the rival
agrarian interests so that American policy was not entirely
consistent. The antagonism of business and agriculture
went badk to Hamilton and Jefferson, Beard maintained,
but by the turn of the century business was in the ascendant.
It needed new markets for its surplus goods and outlets for
its surplus capital, and it turned more and more to the
government for help in finding markets. Government obliged
by becoming more and more concerned with helping business
abroad. Beard regarded this as the basis of the open door
policy.43

Beard, like Hobson, regarded the practice of pro-
tecting nationals abroad in whatever enterprise they under—
took as a dangerous and ill—considered policy. Although he
admitted that government did sometimes discriminate between
the enterprises it considered to be in the ”national
interest” and those that were not, he believed that national
interest was wrongly conceived by American statesmen as
either a sum of particular tangible interests, or a balance
of such interests in society.44 Yet, he pointed out, the

Senate investigation of Philippine independence showed that

 

43Beard, The Idea, Chaps. III to V.

44Beard, The Idea, pp. 110, 462, 21-9, 39.

24

no one ever really bothered to work out the balance sheet
of what the national interest really was.

Beard made a careful survey of the bureaucratic
apparatus of government and its connections with the economic
interests.46 He laid special stress on the role of the
Navy as an early harbinger of imperialism and the ideological
influence of Captain Alfred T. Mahan, who was one of his
major villains. He misread Mahan in regarding him as
primarily concerned with economic interests, for Mahan was
really concerned with sea power for its own sake, and with
wider ideological matters which Beard regarded as window
dressing.47

Beard gave a long statistical analysis of America's
stake abroad and the pressures of the domestic market to
prove that American policy was directed to finding markets
for surplus goods. Yet one fact seems to contradict all his
theories. Although the domestic market was supposed to be
saturated at the turn of the century, the fact is that it
grew as rapidly as the foreign market during the period

after 1900. Of the total production of exportable goods, a

 

45Beard, The Idea, pp. 513-29.

46Beard, The Idea, pp. 408-62.

47Beard, The Idea, pp. 53—64, 337—40, 429-42; see
also Charles A. Beard, A Foreign Policy for America (New

York, London, 1940), pp. 39—48.

 

25

fairly steady ten percent was exported; the proportion of
exports did not rise. And while about the year 1876 America
began to export more than she imported, the relation of the
excess of exports over imports to the total exports did not
change, but remained at roughly ten percent of the total
trade activity.48 Thus our exports grew only with the growth
of the whole domestic economy and presumably with the growth
of the world economy in general.

Although only about ten percent of American produce
was exported, a seemingly small percent of the total
economy, Beard pointed out that this could be the difference
between depression and prosperity, and moreover in certain
crucial industries the percentage of exports was much greater
than the average. In the era after the First World War,
for instance, we exported about half our cotton, turpentine,
resin; a third of our agricultural machinery and sewing
machines, and a high proportion of our petroleum.49 But
surely the whole concept of trade is that each nation produces
more of what it produces best to pay for those goods it
cannot produce?

Beard, writing in the early months of the New Deal,

 

48Beard, The Idea, pp. 245—46, 247-48.

49Beard, The Idea, pp. 256-64.

26

felt there was hope that the whole fallacy of our foreign
policy would be corrected. He saw signs that the government
‘would concentrate on building a domestic market so that
there would no longer be pressure for overseas markets for
goods and capital, and that our foreign policy could be
restricted to really legitimate interests. According to
Beard,

President Roosevelt's conception is one that fixes

clearly the center of gravity for American policy

in the United States itself, envisages the

possibility of a more intense exploitation of

American resources, contemplates a more equitable

distribution of real wealth within the country,

and accepts with reluctance and care only the

minimum of international action which life under

modern conditions impels.50

With his assumption that the only thing that embroiled

a nation in foreign difficulties was the pressure for
markets, Beard became essentially an advocate of isolation
in the 19305. The limitations of the assumption became
evident with the rise of Nazi Germany, the Japanese attack
on Pearl Harbor and other events that led to World War II.
These events also suggested that there might have been other
motives behind the policies that are called imperialistic.

A bodk Which applied the theoretical views of Hobson

and Lenin specifically to the United States and its foreign

 

50Beard, The Idea, p. 544.

 

27

expansion was Dollar Diplomacy; A Study in American Imperialism
by Scott Nearing and Joseph Freeman.51 These authors
believed that America's imperialist expansion was the
inevitable outcome of her capitalist system, and allowed
far less scope to non-economic forces than did either Moon
or Beard. "Economic necessity," they stated, "dictates that
every modern industrial society must develop foreign markets
for its surplus products; must control sources of food,
fuel, minerals, timber and other raw materials; must secure
business opportunities for the investment of surplus capital."52
They contended that imperialism ”is not peculiar to any
nation but corresponds to a certain stage in the development
of economic surplus."53

(According to the theory accepted by Freeman and
Nearing, the search for outlets for surplus capital was
behind American policy in China,’and the authors imply as
much in their discussion of the case of the American China
Development Corporation, the Harriman-Straight railway

plans and the loan negotiations of the Taft administration.

The consortium was in their view the beginning of the era of

 

51New York, 1927.
2 . ...
Nearing and Freeman, p. x111.

3 .
Nearing and Freeman, p. xv.

28

international financial trusts. America's whole policy was
aimed at creating a financial control, particularly in
Manchuria. This interpretation is based on the assumption
that if a J. P. Morgan or Standard Oil or Harriman were
involved, a transaction must be aimed at such control.54

Yet the authors offer no decisive evidence that financial
control was the primary consideration of the State Department.
They quote Taft's message to Congress saying that our
investment in China is "to enable that country to help
itself" and to help "the promotion of those essential reforms
to which China is pledged by treaties,"55 as a proof that
American diplomacy was concerned with the export of capital,
but they give no reason for their interpretation.

Moreover the figures cited by Nearing and Freeman
indicate what a small amount of American capital actually
was involved in China, and they confess that before 1900
America was not a great exporter of capital "as the domestic
demand for capital more than covered the available amount of

- n5 -
investment surplus. 6 It was not until after World War I

that America became a creditor nation and the need to export

 

54Nearing and Freeman, pp. 37, 40—51.
5Nearing and Freeman, p. 265.

6 .
Nearing and Freeman, p. l.

29

capital became crucial. The implication is that the 19205
were the real age of American imperialism.

But if the export of capital were not of crucial
importance before the First World War, then the theory of
Nearing and Freeman would seem to indicate that the search
for raw materials or for a market for surplus goods was the
main motive of American imperialism. Since the authors give
no evidence of the crucial importance of any Chinese imports
to America, presumably they believed that search for markets
was the main consideration. Like Moon and many other commen-
tators they interpreted the Open Door Notes in this way.

IThe open door policy was designed to protect American

business interests in China and America's "sphere of influence"
in Manchuria.I They defined a "sphere of influence” as
territory where a nation will permit no other to exert
political influence and where it will lead in the exploitation
of natural resources; but they did not specify how America
wielded such power or what interests were involved at the turn
of the century. They also asserted that the claim based on

the concession of American China Development Corporation

served as a precedent for claims to the exploitation of

Manchuria.

 

7Nearing and Freeman, pp. 11—12.

58Nearing and Freeman, pp. 35-38, 258.

30

The account of events in China in Dollar Diplomacy
was almost exclusively concerned with economic developments.
It omitted all reference to the policy of Theodore Roosevelt's
administration, but dealt at relative length with the loan
negotiations in which "the State Department has actively
cooperated with American bankers to obtain concessions both
in the Near East and the Far East."59

In the books by Moon and by Nearing and Freeman,
certain assumptions were made about the economic nature of
imperialism based on theories similar to those of Hobson and
Lenin. In the case of China both books gave a fairly factual
account of events, though with stress on economic events,
without making any careful link between these events and
the theory. The reader is left to believe that they have
proved their case. In both instances the authors began with
the theory and applied it to the facts rather than beginning
with the facts to arrive at the theory. In neither book
was there any effort to document the essential link between
economic conditions and political action. Just how was the
necessary imperialist policy evolved? Who put what pressures
on the statesmen? What alternatives were considered?

What analysis determined that diplomatic pressures should

 

9Nearing and Freeman, p. 259.

31

be applied to introduce capital into China at the possible
expense of outlets in Japan or Siberia? What were the parti—
cular problems involved in introducing capital into China?

A foreign policy is not self-created out of air. It is put
into effect by individual statesmen after much discussion and
planning, so that if the export of capital were the primary
aim of the American State Department, one would expect there
to be some documentary evidence of the fact.

Beard tried to supply the missing gap between the
theory and the events with a psychological theory, but
again did not apply his theory to the individual case.

Before turning to a study of the facts about American
policy in China to see whether they accord with the theory,
it might be pertinent to make a number of general criticisms
concerning the application of these economic theories of
imperialism to history. E. M. Winslow has written a very
useful history and critique of the economic interpretation
of imperialism, The Pattern of Imperialism, in which he is
particularly caustic about the historical use of these
theories:

The economic interpretation of imperialism and war
has one great advantage over other interpretations,
and thereon doubtless depends its great popularity:
it gives people something concrete and apparently simple

to talk about. Whatever the cause of war may be,
one of the major causes of the economic interpretation

32

is the ease with which it can be invdked. It appeals

to the logical and scientific mind in an age that

places great store on economic values and science.

It deals with concrete factors and material forces

which people feel they can understand. Above all,

it carries an air of sophistication which can be

imparted with great educational facility. By an

easy transference to personal motives and experiences,

it enables the man in the street to see the world as

himself writ large.60

The historians who have accepted the economic inter-

pretation, Winslow felt, usually did not worry about the fine
points of the theories of Hobson, Lenin and the other
economists. They tended to accept the assumption that, at
least in political life, the basic drive of man is the
search for profit; that modern industry produces more goods
than can be used in the home markets and more capital than
can be absorbed, so that imperialism, economic rivalry and
war are the result. They have not, for instance, considered
whether imperialism is a matter of policy or Whether it
is inevitable. He points out that to the economic historian
imperialism is always the same, and it is always a bad
thing. Moreover it is usually attributed to capitalism
for one reason or another. The analysis is often accompanied

by a message for the amelioration of the situation through

such measures as international mandates, international

 

6OWinslow, p. 44.

33

government or socialism. The whole question of imperialism
thus becomes loaded with emotional overtones.61

Writers on imperialism have usually proved conclusively
that imperialism did not pay the mother country, and they
have generally accepted Hobson's View that the government is
the tool of special interests instead of raising the question
whether there might be other motives of a strategic or
political nature for acquiring colonies. There is sometimes
a tendency to regard states as persons rather than as
institutions run by individual men, and something like a
concept of the "economic state" replaces the "economic man”
as the unit of discussion. It is assumed that nations,
like men, always make rational decisions on the basis of
economic choice, whereas nations, like men, are often
irrational.6

In addition to these assumptions about the nature of
imperialism, there has been considerable looseness in the

use of the term "economic,' as Winslow also points out.
Hobson and others have shown that certain colonies have not

paid economically, but they still maintain that the misguided

belief in the profitability of colonies was the basic motive

 

61Winslow. pp. 42-46 .

62Winslow, pp. 51—60, 91.

34

for their acquisition. This explanation, however, does not
prove economic causality but only defines an ideology. With
a different set of beliefs but with the same economic system
the colony might not be acquired.6

Many transactions dealing in money or material goods
are not "economic" at all, Winslow shows, but result from
value judgments. For instance, a nation that goes to war
to acquire raw materials has made a judgment against buying
the materials in the open market or other alternatives that
might be open to it. The price people are ready to pay for
profit is a value judgment that will vary with the intensity
of the desire and with a wide variety of other values in a
society.64

In addition economic developments are often the
result of other motives. The development of monopolies may
not be primarily an economic matter but the attempt of
businessmen to find security in an insecure world. On the
international scene, imperialism can be seen as a similar
search for security. Fear or rivalry, not profit, might

be considered the basic motive.65

 

63Hobson, pp. 71-73; Winslow, pp. 56—60, 216—26.
64Winslow, pp. 216-26.

65Winslow, pp. 201-06.

35

A wide range of decisions often considered economic
are really political, including regulations for the control
of an economic system, or a change in the economic system.66

The economic theory of history makes many far-
reaching assumptions about the nature of man that are never
really supported by an accompanying psychological explanation.
This theory never proves that man is in fact fundamentally
motivated by the search for profit, nor that even if he
were that this is necessarily an evil. According to
Winslow, ”historians have generally found it easy to believe
that economic motives are purely one sided expressions of
human selfishness and that economic competition . . . is
exclusive and non-reciprocal."67 Winslow suggests on the
contrary that trade and economic activity in general can
be of mutual benefit.

The psychological assumption of Hobson and Lenin
that other motives for imperialism, such as the desire to
do good, are but the hypocritical covers for a desire for
gain, is slippery ground for an historian. It is very

difficult to prove that a man who says he undertakes a

policy because he wants to bring civilization to the natives

 

66Winslow, p. 193.

67Winslow, p. 44.

36

really means he wants to lend them money to fill his own
pockets. This difficulty arises even when one examines
actions as opposed to words. Is the missionary sincere or
the tool of finance? Why does the banker lend money to a
corrupt regime? Is a president looking for votes or for
his place in history in championing the spread of civili-
zation? Both the cynical and the naive approach can be
equally biased.

All these criticisms suggest that there is far
more complexity in the motives of men and of nations than
the economic theory will allow, even in the hands of such
a subtle theorist as Hobson. When one turns to look at the

events, this complexity of motive is confirmed.

CHAPTER II

THE CONTEMPORARY AMERICAN VIEW OF CHINA

The problem of China loomed large in a number of
boOks at the turn of the century by writers who wielded
considerable influence on government policy. A study of
works by Captain A. T. Mahan, Brooks Adams, Henry Adams,
even the anti-imperialist Paul S. Reinsch, and the American
correspondence of the English diplomat, Sir Cecil Spring Rice
give an indication of the context of American thinking.
Although the desire for markets was one reason for the
interest in China, the economic motive was by no means
predominant.

It has not always been the case in America that
policy was influenced by intellectuals, but in this period
American intellectuals carried special weight because they
happened to be close friends of the men who made policy.
Henry Adams was the most intimate companion of John Hay
over a long period of years. His brother, Brooks, and Mahan
were part of the circle that included Theodore Roosevelt,
Henry Cabot Lodge, William W. Rookhill and Sir Cecil Spring’
Rice. While it is of course untrue to say that Roosevelt,

Hay or Rockhill believed everything that Mahan or the Adams

37

38

brothers wrote, and Paul Reinsch was not of the circle, their
ideas are indicative of the general views of the world that
were exchanged over the dinner table and in letters, and
many specific ideas of the intellectuals appear in the
writings of the statesmen, particularly of Roosevelt, who was
a widely read man.

These books indicate that contemporary thought was
far more influenced by Social Darwinism than by Marxism.
Indeed the impact of Darwinism on all aspects of intellectual
life in America has often been noted.1 With a basis in true
science, Darwinian principles were carried over into social
and political life to form the basis of a number of pseudo-
scientific theories. In its attempt to be scientific and
in its stress on inevitable conflict, Darwinism.had much
in common with Marxism. Moreover they both could become an
all-embracing system for the explanation of just about
everything. In the present day whensSocial Darwinism has
lost much of its appeal, it is harder to realize the hold
it had on the minds of men of an earlier generation.

Applied to the affairs of men, Darwinism could cut

in many directions, and it was a more nebulous concept than

 

lRichard Hofstadter, Social Darwinism in American
Thought, 1860-1915 (Philadelphia, 1944).

39

Marxism. In America it was first used by conservatives to

defend the status quo, later by radicals as a reason to

change society. That it was constantly cited as a reason

for imperialist action is substantiated by the fact that

Hobson undertook a careful refutation of Darwinist theory.2

Despite the fallacies Hobson pointed out, echoes of Social

Darwinism appear constantly in American discussions of world

affairs at the turn of the century, and China was often seen

as the final battleground between Western and Eastern societies.
The influence of Social Darwinism is very apparent

in Brooks Adams' book, America's Economic Supremacy,3 a group

of related essays that appeared in 1900. In close to hysterical

terms, Adams expressed the view that all western civilization

was at stake in China. He maintained, in one of these

grandiose historical analyses beloved of the nineteenth

century, that the center of civilization had constantly

moved westward and that America had assumed the mantle of

leadership fallen from the shoulders of a decadent England.

The Pacific would soon rival the Atlantic as a center of

O l I I 4 I I O
commerce and CiVilization. In a companion historical

 

2Hobson, pp. 153-95.
3New York, 1947.

174.

4O

generalization, Adams maintained that there was a traditional
rivalry between sea power and land power; that opposed to the
sea power of England and America there was a rival land

power centered on Russia and Germany.5 China would be the
center of the struggle between these forces.

Adams constantly wrote of this struggle in evolutionary
terms. VAlready," he wrote, "America has been drawn into
war over the dismemberment of one dying civilization [the
Spanish Empire]; and it cannot escape the conflict which
must be waged over the carcass of another._"6 Nations, like
individuals, like species, had risen and decayed. China
was in the death throes. Adams noted with some regret the
symptoms of decline in the British Empire.7

Since only the fittest would survive, America had
to be strong to face the impending battle with barbarian
Russia. Fitness involved not only military strength but
economic strength. Since "society tends to become organized
in greater and denser masses,"8 America must consolidate

her economic system and reorganize her administration. A

 

5Brooks Adams, pp. 112—19.
6Brooks Adams, p. 80.
7Brooks Adams, pp. 138—67.

8Brooks Adams, p. 84.

41

free enterprise economy was a luxury she could no longer
afford. The economic forces must be controlled to the great
end of saving American civilization.9
Adams was aware of the great economic stake in China.
Like others, he regarded China as the last great market
open for the surplus goods of an industrial society.10 But
winning the China market was only a facet of the wider
struggles between civilizations. ’Control of this market
would strengthen America and keep Russia from this strategic
location. 9‘ "‘ .4 [/'1- 7~ “ ““f
Adams conveys a sense of inevitability about the

process of America's exploitation of China. Civilizations
either grew or they decayed. Expansion was a symptom of
growth. Interim solutions, he implies, could not prevent
the struggle that would ensue from this growth.

The best thing that could happen for her [America]

would be for China to remain quiescent. But the

very success and energy of America makes it unlikely

that China can stay stationary; an effort at

development is inevitable, and it behooves Americans

to consider whether they can safely allow that
development to be wholly controlled by others.11

 

9Brooks Adams, pp. 99-106, 135.
10
Brooks Adams, pp. 78-79, 89.

11Brooks Adams, pp. 192-93.

42

Adams even went so far as to say that aggression was better
than sitting back to wait for the impending struggle.

In spite of his dire warnings that America needed
to reform, Adams thought America was best fitted to survive

in the twentieth century. He concluded his argument on this

note:

Our geographical position, our wealth and our energy
pre-eminently fit us to enter upon the development

of eastern Asia and to reduce it to a part of our
economic system. And, moreover, the laws of nature
are immutable. Money will flow where it earns most
return, and investments once made are always protected.
Evidently Americans cannot be excluded from China
without a struggle, and they may not, perhaps, be
welcomed by those who have hitherto shown most anxiety
to obtain a foothold there. The Chinese question,
therefore, must be accepted as the great problem of
the future, as a problem from which there can be no
escape; and as these great struggles for supremacy
sometimes involve an appeal to force, safety lies in
being armed and organized against all emergencies.12

Adams was totally unsentimental in his approach to
politics. Whatever his views of England, for instance, he
did not waste time in eulogies on her past glories. The
business of life is a constant struggle, and power was the
key to survival. Moral considerations were beside the

371
point. he felt America must expand or decay; that survival

was dependent on the markets of China and the defeat of

rivals, notably Russia. This survival was essential to

 

12BroOks Adams, p. 194.

43

preserve American civilization, which was replacing the
decaying British Empire as balance wheel in world affairs.’
Captain Alfred T. Mahan, like Brooks Adams and John

Hay, seemed to feel there was a cosmic tendency pushing
America into world affairs. "There is a spirit abroad,” he
wrote, ”which may yet challenge our claim to exclude its
action and interference in any quarter unless it finds us
prepared there in adequate strength to forbid it or to
exercise our own." This cosmic tendency was often expressed
in terms of the evolutionary struggle, for Mahan went on:

Like all natural forces the impulse takes the

direction of least resistance, but when in its

course it comes upon some region rich in possi-

bilities, but unfruitful through the incapacity

or negligence of those who dwell therein, the

incompetent race or system will go down, as the

inferior race has ever fallen back and disappeared

before the persistent impact of the superior.1
Beard, who regarded Mahan as one of the prime spokesmen for
the capitalist class and the expansionist politicians,
admitted that Mahan's ideas were not based on economic
motives but on two basic maxims: (l) 9Self interest is not

only a legitimate but a fundamental cause for national policy;

one which needs no cloak of hypocricy."; and (2) ”The

 

l3Alfred T. Mahan, The Interest of America in Sea

Power Present and Future (Boston, 1897): PP. 165-66.

44

first law of states, as of men, is self—preservation—-a term
which cannot be narrowed to the bare tenure of a stationary
round of existence. Growth is a property of healthy life."14
Natural growth was the basic force behind expansion, and
strength was necessary to maintain this growth.

It was Mahan's basic belief that sea power should
be the instrument for America‘s natural survival and prestige,
although the reader at times feels that Mahan is in love
with ships just for their own sake. In the book that propelled
Mahan into the public eye in 1890, The Influence of Sea
Power Upon History 1660-1783,15 he analysed the geographic,
political, economic, racial and other factors that created
sea power. Naval power and the power of the merchant fleet
would reinforce each other. In some places Mahan talked of
building a merchant fleet as a reserve military force; and
in others of building a fleet to protect commerce, an enter-
prise in which men had engaged since ancient times.

Although he realized America had few merchant ships to

defend, he maintained she needed a navy to protect her coast

 

l4Beard, A Foreign Policy, pp. 41-43. See also

Beard, The Idea, pp. 433, 69-70.

 

15Boston, 1890.

l6Mahan, Influence of Sea Power, pp. 45—49, 87-88, 26.

45

and the neutral shipping which came to her shores. Neutrality
was no protection in time of war.17 He recognized that the
technological developments of the age of the steamship would
inevitably bring America into relations with the outside
world.18

Taking as axiomatic America's need for sea power,
Mahan began to look at the world about him. He was a strong
advocate of the Isthmian canal, the annexation of Hawaii and
the Philippines for strategic as well as economic reasons.
One of his articles entitled VAmerican Naval Power,"19
enumerated the reasons in addition to the ”cosmic tendency”
for America's taking a role in world politics. Nations have
international duties as well as rights, Mahan said. America
was no longer physically isolated because of the changes in
communications. Our commerce was growing. A strong navy
would be needed if we were to maintain the Monroe Doctrine.
We were now a Pacific power, and Japan had become a potential

threat. Other nations had developed colonies for a variety

of reasons, political and commercial, and somehow America

 

 

 

l7Mahan, Influence of Sea Power, pp. 84-87.
18Mahan, Interest of America, pp. 146-48.
19

than, Interest of America, pp. 137-72; the article
appeared in 1895.

46

would inevitably get involved in the process.

Mahan, like Brooks Adams, also talked of taking over
Britain's role in the world, or of helping her to police
the world and spread Anglo-Saxon institutions, although he
did not favor a formal alliance with Britain.20 "If a plea
of the world's welfare seems surprisingly like a cloak for
national self interest, let the latter be accepted frankly
as the adequate motive which it assuredly is.921 As an
extension of this reasoning, Mahan believed that America's
welfare would serve the world when she adjusted her short
range interests to accord with the proper long term view.

Mahan, like others of his age, reflected a dualism
between the traditionally religious and idealistic outlook
of America and the realpglitik derived from the current
scene and the new amorality of science.23 He was particularly
skillful in interweaving the materialistic and idealistic

arguments for expansion, and despite the fact that the

 

20Mahan, Interest of America, pp. 108-34.

21Mahan, Interest of America, p. 51.

22Mahan, Interest of Americay p. 112; Alfred T.
Mahan, The Problem of Asia and Its Effect upon International
Policies (Boston, 1900): pp. 1-3 passim.

23Henry Adams, The Education of Henry Adams (New York,
1931), is much concerned with this mental battle.

47

materialistic predominate, his moral and ideological arguments
carry a conviction of genuine belief and do not seem to be
simply window dressing, as Beard suggests.24 In addition
to the Anglo-Saxon mission, Mahan was deeply concerned about
the need to preserve and extend Christian civilization in
the Orient.

China held a special fascination for the age. It
was represented as the last available market. Men were
dazzled by the concept of such a large population under one
government, and they tended to overlook the fact that this
population lived in poverty and was ruled by a weak despotism
that left much authority in local hands. In addition to its
large space on the map, China had other attractions that
tended to focus attention on it. It was an ancient civili—
zation, and those who wrote about China had a respect for
this civilization they did not accord to Africa or South
America, other possible markets of the nineteenth century.
There was a concern about what would happen to this civili—
zation when it was set in motion by the more dynamic
civilization of the West, particularly by the impact of

western industrial economy; and how this revitalized Eastern

 

4Beard, A Foreign Policy, p. 46; a similar view is
maintained by Robert Osgood, Ideals and Self-Interest in
America's Foreign Relations (Chicago, 1953), pp. 32-39.

48

civilization (with its potential military power) would
impinge on the west. This interaction of civilizations was
viewed alternatively with alarm and with hope.

Mahan on the whole viewed the prospect with alarm.
He noted that the two civilizations were approaching each
other in their ideas about material advantage (Japan had
already grasped this concept from the West), but his great
fear lay in the fact that the East lacked corresponding
spiritual ideals. ”It is not merely that the two are in
different stages of development from a common source, as are
Russia and Great Britain. They are running as yet on wholly
different lines, springing from conceptions radically
different.”25 Whatever the shortcomings of Christianity,
it had produced a common set of ideals that governed the
conduct of even the agnostic in the West. These ideals
posed some self-restraints on the materialistic grasping
that had become prevalent in the West. Chinese civilization,
as Mahan saw it, had no such restraints. In self defense,
and as a duty, therefore, it was the mission of the West
to indoctrinate the East with Christian ideals, as the

British were doing in India.26 With the two civilizations

 

25Mahan, Interest of America, p. 228.

26Mahan, Interest of America, p. 244.

 

49

of East and west coming into contact and probably into
conflict with each other, America would inevitably be involved
in this struggle between civilizations. Mahan believed:

It is essential to our own good, it is yet more

essential as part of our duty to the commonwealth

of people to which we racially belong, that we lodk

with clear, dispassionate, but resolute eyes upon

the fact that civilizations on different planes of

material proSperity and progress, with different

spiritual ideals, and with very different political

capacities are fast closing together.
Since ”conflict is the condition of all life”28 this meeting
would breed battles and America would have to be prepared
spiritually and materially._

In these global discussions, commentators sometimes

had difficulty in deciding on which side Russia belonged.
In the above quotations Mahan seemed to regard her as part
of western civilization, but in The Problem of Asia,
published three years later, Russia played the role of
villain. Like Brooks Adams, Mahan saw two civilizations,
one based on land power, Russia, the other, Britain and America,
based on sea power, competing for the body of China. This

conception recognized the existing conflict of interest

between Britain and Russia extending from the Straits through

 

27Mahan, Interest of America, p. 263.

28Mahan, Interest of America, p. 268.

50

the entire Middle East to the Pacific. In discussing the
conflict between Britain and Russia, Mahan evaluated the
military and strategic position of all the powers in China,
although he tended to overlook the complications arising
from their relationship to each other in Europe. He hoped
that by a rational estimate of the forces at work in China,
an actual battle between the sea and land powers would be
avoided. American policy should be based on a careful
awareness of these international power relations. ‘Control
of commerce was a factor of power open to sea powers that
would help to sway the balance of power in their favor. 9 ’
’The prize to the victor in this struggle of sea and

land power was not just the commercial advantage of the
China market, this was but a pawn in the game, the ”short
term” goal, but the power to determine the future of
civilization in China-—"the long term" aim. I

The expansion of commerce, and the benefit resulting

therefrom, are, however, only part of the objects

that necessitate European pressure upon the China

of our day. The close approach and contact of

Eastern and Western civilizations . . . are matters
which can no longer be disregarded, or postponed by
any arguments derived from the propriety of non-
interference, or from the conventional rights of a so-
called independent state to regulate its own internal

 

29Mahan, Problem of Asia, pp. 49-55.

30Mahan, Problem of Asia, pp. 165-66.

 

51

affairs . . . . All that can profitably be attempted
is to direct, by so shaping conditions that the
higher elements of either civilization can act as
freely as do the motives of pecuniary profit which,
though perfectly proper, are lower as well as
stronger.
To achieve this freedom for the development of civilization,
Mahan urged the importance of keeping China open to western
ideas, an intellectual open door.

China would have to be given time to evolve gradually
toward a Christian and industrial civilization so that she
did not erupt into revolution. Time was of the essence, and
to gain time it might be necessary to use force. In Mahan's
View the competition between nations in China actually
helped to gain time for China to absorb the new civili-
zation peacefully, and incidentally insured that China did
not develop into a monolithic state like Russia, but developed
regional differences corresponding to the spheres of the
great powers.

America should work cooperatively not only with
Britain, but with France, Germany and Japan which he here
classified as sea powers, to offset the Russian threat and

preserve China, although Mehan opposed actual alliances.

By following this policy America would benefit in the short

 

31Mahan, Problem of Asia, pp. 88—95.

52

term through commerce, and at the same time work toward the
long term goal of preserving China and saving Western civili-
zation. In opening China,
Commerce and its gains, though not the worthiest and
most benignant result, are the most obvious and
convincing expression. In its train we may hope will
follow those moral and spiritual ideals . . . in
which alone can surely be found the happy renewal
of Asia.32
A proper adjustment of the long term and short term View
would benefit everyone.
There must be the speculative forecast of the distant
future, hand in hand with the consciousness of what
at the moment is possible; and there must also be
embraced in due relative proportions, the sense of
primary duty to one's country and an unremitting
regard to the real exigencies and needs of other
people.33
Mahan and Brooks Adams were typical exponents of an
age that was trying to fit the traditionally strong idealism
of America into the brutal ”facts of nature” revealed by
Darwin. Survival of the fittest and inevitable conflict
in the affairs of men had the sanction of science and had to
be accommodated in political thinking. The fallacies of

applying biology to social life have since been pointed

out, by Hobson among others, and today it is hard to realize

 

32than, Problem of Asia, p. 163.

33Mahan, Problem of Asia, p. 113.

53

the strength of Social Darwinism in the thought of the period.
Yet in other respects the concept of the battle of civili-
zations and ideologies has a very contemporary ring, and the
introduction of the concept of power in international affairs
perhaps had a salutary effect on American thinking about
foreign policy. The idea of the importance of power in
international affairs of course did not originate with
Social Darwinism and was a lesson daily taught by the very
competitive politics of imperialism, but by seeking to come
to terms with the problem of physical survival and the
question of the inevitability of conflict in the process of
evolution, Americans were forced to focus attention on the
problem of physical power in the world. Another generation
was to pass by before Americanssrealized that moral righteousness
alone did not win battles, although the relative weight to
be given righteousness and battleships is still a disputed
point in this country. But the writers at the turn of the
century pointed out that if right was to win, it had better
be mighty.

One cannot discuss the intellectual outlook of late

nineteenth century America without mentioning The Education

 

of Henry Adams. Although the book was a personal and
philosophical search for meaning in the modern world,

abstruse in its irony and veiled references‘rather.than a

54

discussion of current politics, it caught important
contemporary trends of thought. Many of its themes were
echoed in the writers mentioned. Henry Adams was largely
concerned with the impact of scientific ideas on the
eighteenth century concepts of man, of history, of God.
Henry Adams, unlike his brother Brooks, was not greatly
impressed by the relevance of evolution to human affairs,
but testified to its impact on his contemporaries.34
Although he mentioned Marx, he apparently did not consider
economic conditions as a basic force in history nor did he
regard Marxian thought of great significance in America.

For his own interpretation of history Adams turned
to physics and produced an almost mystical concept of forces
in history. This theory found no followers in the political
writers of the period, but represented a typical effort to
find some all—pervading formula to account for the affairs
of men. Adams contrasted the civilization of the Middle
Ages with the civilization of the present, and made the
dynamo, a product of science, the symbol of the current
age. For him, too, power, not ideas, was what counted in

the modern world.

 

34Henry Adams, Education, pp. 225-36.

55

He also was concerned with need for America to play
a role in the world, and cheered John Hay's efforts in that
direction. Hay was his hero.3

Adams' book reflected the general American affinity
to England, despite its shortcomings, and the dislike of
Russia, which for Adams represented the force of inertia
in his scheme of things. ”The vast force of inertia known
as China was to be united with the huge hulk of Russia in a
single mass which no amount of new force could henceforth
deflect."36 America represented energy and intensity.

Which was to be stronger?

Spring Rice's letters also echo many of the themes
of Brooks Adams and Mahan, particularly the Anglo-Saxon
mission, the ideological struggle with Russia and the rise
and decay of civilizations. He wrote, of course, from the
point of view of an Englishman, but in his letters there is
no suggestion that there might be any divergence of interest
between England and America. The central issue in the world
was the duel between England and Russia. "England stands

for liberty of thought and government and for the free

 

35Henry Adams, Education, pp. 365, 392, 422, 465,
504.

36Henry Adams, Education, p. 439. See also pp. 440,
408-11.

56

exercise of foreign enterprise throughout her empire. Russia
is the personification of autocracy and the exclusion of
foreign trade.”37 Germany, as an autocracy, would be ranged
on Russia's side.

Spring Rice was not quite sure that England alone
was strong enough or prepared to make the sacrifices to
defend herself against tyrannous Russia; but he looked to
America and the other British dominions to save Anglo-Saxon
civilization. In a typical expression of this view to
Roosevelt in 1898 he wrote:

I believe we should make a game fight of it. I only
hope so -— but it may possibly end very badly. In
that case, the fall of England itself will not mean
the destruction or anything like it, of the work of
England —- provided that the different branches of
the race have not got divided by irreconcilable
hatreds. For whether the British Empire goes or not,
the English people throughout the world will make
such a power as can never be destroyed. I don't
care for black millions and red maps; what I care
for, Which I learned from you, is a brave manly and
honest people; the people who speak English through-
out the world.38

In congratulating Senator Lodge on America's annexation

of Hawaii, Spring Rice expressed his awareness of the decline

of England:

 

3 . . . . .
7The Letters and Friendships of Sir CeCil Spring

Rice, ed., Stephen L. Gwynn, 2 Vols. (Boston and New York,
1929), I, p. 404.

38SpringRice Letters, I, p. 270.

57

I think that there can be no doubt that there is an
intention (and a natural one) to depose English
civilization (I mean yours as much and more than
mine) from the Pacific. The new order of things
which is to replace it may be better; but it isn't
ours, it is absolutely and wholly different from
ours, and we have the right and the duty to defend
what we most certainly have won on the American,
Australian and Chinese coasts.

But Spring Rice went on to express his hope that America
would take over England's role:
I don't believe that England, the island, is strong
enough to defend English civilization alone -- and
I have no sympathy whatever with the people who believe
that English institutions, literature, language and
greatness are courtiers at the throne of London. I
believe they are common possessions, to be defended
as they were won, in common —- and to be enjoyed in
common too. And I welcome any step which America
takes outside her continent because it tends to the
increase of the common good.39
Spring Rice often returned to the theme that America
must take over Britain's role as defender of English
civilization. He wrote Lodge again in 1904, ”England is
an artificial institution and the British Empire may perhaps
be destroyed by a succession of well directed blows . . . I
believe the United States to be the real fortress of our race

and it is an infinite satisfaction to see its prosperity

and power.”4

 

39SpringRice Letters, I, p. 249.

40Spring Rice Letters, I, p. 407.

58

It is to be seen from these quotations that Spring
Rice was primarily concerned about Anglo-Saxon civilization
and viewed autocratic Russia as the enemy. China and Japan
were but pawns in this major power struggle. John Hay, too,
was inclined to view things in this light but Roosevelt
apparently took Spring Rice's views with a grain of salt.
Several times in his letters he was careful to point out that
America was not Anglo-Saxon but a mixture of races, as he
himself was. Moreover there was bound to be a difference
in outlodk between an Englishman who felt the Empire had
passed its peak and an American who felt his country was on
the rise. Despite these differences of opinion, Spring Rice
undoubtedly encouraged a tendency among Americans to think
in world terms and to see the world as a struggle of
civilizations.

Even writers who in general opposed the expansionist
policy and Social Darwinism had points of resemblance to
Mahan and Brooks Adams. Paul S. Reinsch, whose ideas are
interesting in view of his later role in Chinese affairs,
anticipated many of Hobson's arguments in his book World
Politics at the End of the Nineteenth Century as Influenced

by the Oriental Situation, although he did not present such

 

a closely reasoned attack on imperialism and seemed to take

59

for granted American expansionist tendencies.41 The first
part of the book was a general exposition of contemporary
world situation, and the second dealt with "the true centre
of interest in present international politics, namely China."42
’Reinsch, like Hobson, viewed the contemporary
imperialism as different from the past in that it was a
conscious government policy, rather than a gradual development
through the expansion of private trade or through the
migration of peoples (as was the case of Russia in Siberia).
This conscious policy was more apt to lead to wars,
particularly as each nation wanted to ”civilize” the‘world.43 I
Unlike the Social Darwinists he did not regard
conflict as a necessary state of existence, but he did feel
that the current imperialism was influenced by evolutionary
concepts. In his View imperialism was caused by excessive
nationalism, rivalry between nations, messianic ideas, and
as a concomitant to these views, protectioist economic
policies. ‘He recognized that the desire to protect

investments played a large role in imperialism, but regarded

this as an almost inevitable result of bad governments in

 

41Reinsch, pp. 309—10.
2 . .
Reinsch, p. Vi.

43Reinsch, pp. 61-68.

60

the backward areas.44 Economic penetration was a method

of imperialism, not a cause, nor was it a peculiar trait of
capitalism."Badkward countries needed capital, and to get
it order and stability had to be established somehow. "In
this way, the real needs ofthe expanding human race are
united with the self interest of capitalism to form a lever
for expansion. ’Though true, it is a one sided View that
imperialism is the selfish policy of capital.”45 Instead
it was part of the struggle between civilization and
barbarism, and a sad duty of the white race."

In discussing the current situation in China he
deplored the fact that political considerations had interfered
with the development of the country. "It is unfortunate
that political interference is constantly being invited in
China on account of the insecurity which capital, unsupported
by government backing, must necessarily feel.”46 The
business syndicates therefore got involved in political
intrigue which in turn made all commercial dealings politically
suspect. Commerce became a tool of national rivalries. In

his discussion of China, Reinsch was fully alive to the

 

44Reinsch, pp. 8-13, 34-40, passim.
45Reinsch, p. 42.

46Reinsch, p. 145.

61

complex interaction of politics and commerce, but seemed to
suggest that, left to themselves, business and financial
interests would be of service to China. Thus Reinsch, who
foreshadowed many of Hobson's arguments, did not give economic
considerations quite such a prominent position, and did not
regard finance capital as totally villainous. Reinsch also
anticipated many of Hobson's arguments against imperialism.
In his opinion trade did not necessarily follow the flag,
colonies did not pay, and imperialism had an adverse effect
on domestic political reform.4.7

Reinsch showed greater affinity to his expansionist
contemporaries in regarding the problem of China as essentially
one of the interaction of civilizations. After discussing
the national rivalries reflected on the China scene, he turned
to the problem of the effect of the industrial revolution
on China and the need for Chinese reform. Instead of the
forceful Christianization of China advocated by Mahan as a
defense for Western Civilization, Reinsch urged tact and
held out hope for a peaceful merging of the best qualities
of both civilizations, although he did not exclude the use

of force to protect lives and property.48

 

47Reinsch, pp. 34—40, 71, 327-47.

48Reinsch, pp. 88—89, 194, 236-57.

62

Concerning America's role in the East, Reinsch seemed
to take it for granted that she was involved, and urged
only that she act with good motives and tact. He did not
doubt that she had a right to share the riches of the Orient
and he felt America also had a contribution to make to Chinese
civilization. He differed from Mahan and Spring Rice in
that he did not exaggerate this contribution into a sanctified
Anglo-Saxon mission to preserve civilization. He recognized
America's close political affinity with Britain, but realized
that our material aims were not always akin. He warned
against allowing Britain to draw us into her feud with Russia
and so drive Russia out of the Western camp. Reinsch shared
some of the general alarm about Russia but thought she might
have a role in the East as a mediator between the two
civilizations of which she was an amalgam.49

Thus Paul Reinsch, who eXhibited none of the symptoms
of imperialist fervor nor the breast-beating nationalism
of Adams and Mahan, still regarded it as inevitable that
America would be drawn into world affairs; that China was
the significant area of activity because she represented an
ancient civilization which was just coming into contact with

the west; that for better or worse the East and West would

 

49Reinsch, pp. 359-60, 206-21, 240.

63

influence each other; that America had a special affinity to
Britain; and that Russia was a potential threat. Moreover,
while he recognized the economic aspects of the China
problem, he tended to regard these more as symptoms than
causes of imperialism.

It remains to be seen how the ideas discussed in this
chapter influenced the thinking and policy of American

statesmen with regard to China.

CHAPTER III

AMERICA'S ECONOMIC STAKE IN CHINA

To judge the validity of the economic theory of
imperialism as an explanation for American policy in China,
it is necessary to look at America's economic relations with
that country. The theory states that the surplus goods of
a highly developed capitalist system need an outlet, that
capital accumulates faster than the home market can absorb it,
and that political interference and possible territorial
annexation follow investment. While it is beyond the scope
of this study to analyse the whole structure of the American
economy to determine whether it had in fact reached the
stage of finance capital, it is possible to get some picture
of American investment in China and of the nature and the
extent of her trade to discover whether in fact China was
an important market and fieldibr investment.

The picture is fairly clear concerning America's
capital investment in China. It was small. Even Nearing

and Freeman admit that America was not a great exporter of

 

1The view that the United States had reached the
stage of ”finance capitalism” is expressed, for instance, in
Arthur Meier Schlesinger, Political and Social Growth of the
American People, 3rd ed. (New York, 1941), p. 297.

 

64

65

capital before 1900 "as the domestic demand for capital more
than covered the available amount of investment surplus.”2

American investment in China can be compared to her
total foreign investment, and also to the total of all
foreign investment in China. One set of figures estimates
all of America's investment in Asia in 1900 (including the
Philippines, Japan, Australia, New Zealand as well as China)
at $5 million, which would be just over 1 per cent of her total
foreign investment of $455 million. Canada and Central
America were the areas of largest investment, with $150 and
$195 million respectively. By 1912 America's investment in
China and Japan had risen to $50 million out of a total of
$1,740 million, or roughly 2-1/2 per cent.3

C. F. Remer estimated the foreign debt of China on a
different basis by including ”a reasonable valuation of all
sources within China from which an income is received or is

normally to be expected by persons who are not Chinese."4

 

2Nearing and Freeman, pp. 11—12.

3Beard, Idea, p. 209, citing figures from America's
Direct Investments in Foreign Countries; Nearing and Freeman,
p. 11, cite the same figures drawn from H. E. Fisk, Inter-
AllygDebts.

4C. F. Remer, Foreign Investments in China (New York,
1933), p. 62.

 

66

This would therefore include properties held by the foreign
colony in China and the resulting estimate is far greater
than the estimate based simply on the income from capital
investment in China. Remer's figures give the relative
standing of American capital with that of other foreign
capital. Again the American role is small.

Remer estimated that in 1902 the total foreign
investment in China was $787.9 million, of which America's
share was $19.7 million or 2.5 per cent. The direct business
investment he estimated at $17.2 million, of which about $10
million was in Shanghai. This included real estate values
which could only be guessed at. American holdings of the
Chinese government were $2.2 million, the amount of the bonds
sold by the American China Development Corporation. In
addition there was another $5 million of holdings in mission
properties.5

By 1914 the figures for American investment had
risen to: $42 million for business investment; $7.29 million
for securities and government obligations; and $10 million
for mission property. Excluding mission property, this was

still only 3.1 per cent of the total foreign investment of

 

5Remer, Investments, pp. 76, 254—5, 259.

67

$1,610.3 million.6 In 1902 Britain, with 33 per cent of the
total foreign investment, Russia (31.3 per cent) and Germany
(20.9 per cent) were the largest investors; while by 1914
Japan (13.6 per cent) and France(10.7 per cent) drew close
to Germany and Russia in proportion,although Britain was still
the largest investor with 37.7 per cent of the total.7
In sum, it can be seen that the investment of all

nations in China was a very small portion of total world
investment and that America's portion was among the smallest.
Moreover, although investment in China more than doubled from
1902 to 1914, America's share did not rise appreciably. This
does not mean that there were not efforts made by Americans
to attract more American capital to China. Nevertheless,
the small amount invested by Western nations in China is
remarkable and provoked Remer to ask the question:

The capital has been available in the capital exporting

countries of the west throughout the century, except

for the period of the World War. It has been available
at rates well below the rates of interest that have

 

6Remer, Investments, p. 274.

 

7Remer, Investments, p. 74. For the year 1931 Remer
gives the proportion of each country's foreign investment
devoted to China, and it is interesting that even at that
late date China represented only 1.3 per cent of America's
foreign investment, and only 5.9 per cent of Britain's,
but it represented 81.9 per cent of Japan's total
(pp. 77-78).

68

prevailed in China. Why has it not gone to China?8
Remer provided a reply to his own question. The answer lay
in part in the political upheavals in China, but also’in
part in the economic structure and traditions of the country
which prevented the absorption of more capital. The history
of the American China Development Corporation, the only
large-scale business investment by Americans in the early
years of the century, and the loan negotiations after 1908
provide some insight into the reasons why more capital was
not invested in China.

'With American investment in China so small, it is
very difficult to argue that her imperialist activity in
that area was inaugurated to protect her investment.

The figures on American trade with China present a
more complicated picture than those on investment. American
economic discussions about China at the turn of the century
almost always spoke of China as a market for goods, not for
money. A decade later much of the argument for investing
money in China rested on the belief that investment would
be needed to preserve America's share of the market for
goods, rather than on a desire to invest for its own sake.

Willard Straight wanted American investment in Manchuria to

 

8Remer, Investments, pp. 230-31.

 

69

build up the market as a political weapon against Japan.
The contracts for railway supplies usually went to the country
supplying the money. "Trade follows bonds,” as one observer
put it. A similar situation prevailed in other fields.9

The economic argument for imperialism maintains that
the over-production of domestic manufactured goods requires
an external market. It was noted by Beard, and also by
Brooks Adams, that about 1876 America changed from being an
over-all importing nation to an exporting nation, that she
began producing more goods than she could consume. There
was also a gradual reversal from being an exporter to being
an importer of raw materials and an exporter of manufactured
goods, although there were considerable fluctuations in this
pattern. This brought about a shift in the areas with which
America traded, a decline in her trade with Europe and a rise
in her trade with the under-developed countries.10 But if
the pressure of over-production was the basic reason for

the search for markets, one might expect this problem to

 

9Herbert Croly, Willard Straight (New York, 1924),
pp. 237—38; George E. Anderson, Railwanyituation in China,
Special Consular Reports, No. 48 (Washington, 1911), p. 31.

10Beard, Idea, pp. 246-55; Brooks Adams, p. 87-887
Nearing and Freeman, pp. 8-10. The Shaping of American
Diplomacy, ed. by William Appleman Williams (Chicago, 1956),
pp. 328-32.

7O

grow progressively worse. Instead, despite the growth of the
American economy, the proportion of exports over imports
remained approximately constant in relation to the total
amount of exportable goods, about ten per cent.1

Despite all the rosy dreams of the China market and
its potential expansion, its actual value remained relatively
small. Although China's trade about doubled between 1900 and
1914 (and again by 1931) it represented only a minute portion
of the total world trade: 1.5 per cent in 1900 and 1.7 per
cent at the beginning of the First World War. Of this small
pie, Britain's slice declined from almost a monopoly with
85 per cent in 1871, but America's slice did not grow
appreciably. It varied between 5 and 10 per cent of the
total trade of China from 1871 to 1915, with the exception
of a few years around 1905.12

In the early years a very small part of American
exports went to all Asia, 1.7 per cent in the period 1876-
1880, a figure which rose to 3.9 per cent by 1896-1900. By
1910-14 it was 5.6 per cent, a still small but not insigni-
ficant part of the total. Europe as an area of export

declined from 83.1 per cent in the 1876-80 period to 62.3

 

llBeard, Idea, pp. 247-48.

12Remer, Investments, pp. 48, 261.

71

per cent by 1910-14. This confirms the idea that as America
changed from an exporter of raw material to an exporter of
manufactured goods her markets changed, but the process was
not far advanced by 1914..13 Oriental imports played a larger
role than American exports to the Orient in the American
economy. They rose from 11.3 per cent of the total in
1876-80 to 15.3 per cent in the 1910-14 period. However, a
large proportion of this import was from Japan.14
No reliable estimates exist for the value of American
trade with China because the Chinese Maritime Customs
registered goods from the port of departure and much of
America's trade entered China from Canada or Hong Kong. The
consul-general in Shanghai, John Goodnow, complained of this
practice in January, 1899, noting that the Customs report
cited American trade for that year variously as 12,420,302 taels
and 18,362,307 taels. This was about a tenth of all foreign
trade, whereas Goodnow calculated that American trade

represented about a seventh of the total. His own calculation

was that American goods which entered China in 1898 were

 

l3Beard, Idea, p. 273. By 1932 American exports to

the Orient constituted 18.1 per cent of the total, and to
Europe, 46.8 per cent.

14Beard, Idea, pp. 281, 284. In 1932 Oriental
imports represented 27.4 per cent, rivaling Europe's 29.4
per cent.

72

worth $20 million.15

In America's trade with China, manufactured cotton
goods, particularly yard goods, were by all odds the most
important item, and while the value of this trade was not
of staggering proportions, it was worth protecting. Next
in importance were kerosene and flour, followed by iron,
particularly steel rails, and tobacco. There were other
goods in small quantity. Of the industries involved in the
China trade, this market was of vital importance only to the
cotton manufacturers.

American statistics put the total value of all
exported cotton goods in 1899 at $20 million or more, of
which about half went to China.16 The proportion of the
cotton goods that went to China remained high throughout the
period under discussion, reaching approximately $33 million

out of a total of $47 million total export by 1905. In

 

5Consular Reports, Shanghai, General Records of the

State Department, vol. 46, January 25, 1899, December 23, 1899.
In 1899 the tael was worth 71 cents. These figures can
therefore be translated: 12,420,302 taels, $8,116,614;
and 18,362,307 taels, $13,037,237.

16The precise figures given by different sources
vary, but the proportion sent to China is always approximately
half. Statistical Abstract of the United States (Washington),
1899, Twenty-Second Number, p. 333; Monthly Summary of
Commerce and Finance of the United States (Washington),
December, 1900, p. 1513.

73

1906 the total amount of cotton goods exported dropped to
$32 million of which half still went to China. By 1910—12
other markets were beginning to rival China to some extent,
and in 1912 the value of yard goods that were sent to the
Philippines ($5 million), actually exceeded that sent to
China ($4.6 million). The total value of cotton yard goods
exported in that year was more than $30 million. Throughout
the period, there were great fluctuations in the extent of
the China trade and the total trade.17

In addition to being a major source of exports to
China, the cotton manufacturing industry was in a strategic
political position to apply pressure on American policy
makers. It was the major industry of the South, which held
a weighted place in Congress, and was also a major industry
in Massachusetts, the seat of Senator Henry Cabot Lodge, one
of the foremost advocates of expansion” ’

In 1899 the cotton manufacturers of South Carolina
wrote to Senator McLaurin (of Mississippi) stating that the
cotton industry was the paramount manufacturing interest in

that state, and that it produced almost exclusively for the

China market. If the China market were cut, this trade

 

l7Monthly Summary, December, 1906, p. 1128; December,

1912, p. 661.

74

would have to compete in the home market. Consul Goodnow in
Shanghai cited this letter in a speech supporting the
building of an Isthmian canal, which would shorten the trade
route to China and hence reduce costs. He went on to stress
the potential dangers of a slump in the Southern cotton
industry in its effect on the delicate labor and race
relations of the region.1

The cotton interests together with the members of the
American China Development Company were the most active
supporters of the open door policy. Despite this political
power, the cotton interests did not in other respects meet
the specifications of the economic theorists. Far from
being a centralized, monopolistic industry, it was one of the
most competitive in the nation, and much of the trade with
China had been built up to meet an estimated demand rather
than being a surplus dumped on a foreign market.19

There were certain special conditions about the cotton
market in China that are worth noting. Cotton was one of
China's main imports, representing up to 40 per cent of her

total imports until 1905, after which it declined in relative

importance although it was still 32 per cent of the total

 

18Consular Reports, Shanghai, Vol. 46, December 23, 1900.

19Campbell, p. 20.

75

in 1913. Britain was the main supplier of this market,
but the American share grew faster than Britain's. However,
since America usually supplied the cheaper goods, her trade
was more subject to the fluctuations which were caused by
the general prosperity of China. If American prices were
not sufficiently low, the Chinese reverted to their traditional
homespun. Also, American goods felt earlier than British
the competition of India and Japan.20

In the years after 1905 the Japanese competition was
the main reason for the decline of America's cotton trade
with China. Apart from any political pressures Japan used,
she had a natural trade advantage in the fact that she was
a buyer of raw Chinese cotton, and that she manufactured
the cheaper grades of cotton goods. The cotton market was
further complicated by the fact that China began to spin
her own cotton, so that after 1903 the market for cotton
yarns did not develop so fast as the market for manufactured
cotton goods.

Remer notes one final instability which applied to

 

20C. F. Remer, The Foreign Trade of China (Shanghai,
1926), pp. 91-94, 150-52; George E. Anderson, Cotton-Goods
Trade in China, Special Consular Reports No 44, Department
of Commerce and Labor, Bureau of Manufacturers (washington,
1911). pp. 11-12.

21Remer, Trade, pp. 86—87, 94, 150-51, 154.

76

all trade, and this was its highly speculative nature, due
to the fluctuations in the value of silver, on which the tael
was based. As a result many speculators entered the trade
who were not reliable merchants.22

The fluctuations noted in the export of cotton to
China were even more apparent with the other major American
exports. About $4 million worth of kerosene was shipped to
China and Hong Kong in 1899 out of a total American export
of $54 million. In 1905 the figure rose to more than $7
million out of a total export of $71 million, yet in the
following year dropped to just over $4 million out of a
total export of $76 million. By 1910 and 1911 the total
value of kerosene shipped to China was rivaling the value
of cotton goods. Similar fluctuations can be found in the
figures for tobacco, which did not rise much above $1
million in the best year, and steel rails.

The same pattern prevailed with wheat flour. Only
$87 thousand was exported to China in 1899, while $334‘
thousand was sent in 1900. Almost $2 million worth of

wheat flour entered China in 1906, four times the amount of

the previous year. In 1910 some $3 million worth of wheat

 

22Remer, Trade, pp. 78—79; Anderson, Cotton—Goods,
pp. 11-12.

77

was shipped to China and Hong Kong, and this figure more
than doubled in the following two years.23

A large proportion of America's exports to China,
and perhaps as much as 90 per cent of American cotton goods,
went to Manchuria before 1905.24 The market in Manchuria
had grown spectacularly in the years before 1900 and there
were great hopes that it would continue to expand. American
goods were well established at the turn of the century,
representing about a third of all foreign goods entering
Manchuria. One estimate put the total imports from all
countries into Manchuria in 1899 at $20 million.25 In
supporting a plea for the establishment of an American
consulate at Newchwang in 1900, Consul Goodnow in Shanghai
forwarded some statistics on American trade in that port.
American drills valued at 2,023,646 taels were sold in

1900, ten times as many as a decade previously; America

sold cotton sheetings valued at 3,910,916 Haikwan taels.

 

23MonthlySummary, December, 1900, pp. 1523, 1509;

December, 1906, pp. 1124, 1132, 1143, 1147; December, 1912,
pp. 659, 663, 667, 668.

24Consular Reports, Shanghai, Vol. 46, December 23,
1899.

2 . .
5Foreign Markets for American Cotton Manufactures,
Special Consular Reports, vol. XXXVI (washington, 1905),
pp. 256.

78

The amount of kerosene exported by America to Manchuria
increased from 1,730,000 gallons in 1898 to 2,282,060
gallons in 1900. This would be only a small portion of
America's total export to China in 1900 of about 46 million
gallons of refined oils. The amount of increase was impressive
if not the total figures, and the prospective railway
development of Manchuria promised further increases if
America could hold her share of the market.26

While the total amount of the China trade was not
great, most contemporary reports on the market stressed
the rapid growth of the market and the great potential for
the future.27 Up to 1905 America seemed to be gaining at
the expense of Britain who had been the largest supplier of
China's needs. However, after that year America's proportion
of China's total trade decreased somewhat.28 Some of the

reason for this is indicated in the more sober contemporary

reports. On the one hand American business men were not

 

26Consular Reports, Shanghai, Vol. 47, November 27
and December 5, 1900. With the Haikwan tael valued at 74
cents in 1900 the above figures could be translated as:
2,023,646 taels, $1,497,488; 3,910,916 taels, $2,894,077.
Monthly Summary, December, 1900, p. 1523.

27Consular Reports, Shanghai, Vol. 47, November 27,
1900; Foreign Markets for Cotton, pp. 38, 252; Anderson,
Cotton-Goods, p. 30.

28Remer, Trade, pp. 161-63.

79

pursuing the market as avidly as they might, or as one might
expect if the domestic market were threatened with disastrous
glut; on the other hand representatives in China were
pointing out that the China market was something of a myth.
There are many indications that Americans did not do

everything they could to meet the foreign competition in
China in the years before the political obstacles became
too great. A 1905 report of the consul in Newchwang said:

If American trade in Manchuria in cotton goods,

kerosene and other lines assumes the extent to which

the economic opportunities entitle it, there must

be developed some banking association that will

assist and support the trade and branches must be

established in the principle trade centers of the

country.29
He went on to cite the practices of the Japanese and Russian
banks in the matter of credit and financing. Moreover the
companies needed agencies and representatives in Manchuria.
Catalogues would not do the job. The Hong Kong consul
reported that there was not enough trade in cotton there to
warrant a special study of the market by American manu-

30

facturers.

The American Minister in Peking did not believe

American businessmen had availed themselves of the opportunities

 

29Foreign Markets for Cotton, p. 248.

30Foreign Markets for Cotton, p. 256.

80

in China. Rockhill felt that Japan would maintain the open
door in Manchuria after the Russian war, and that America
could have equal rights in that region ”if they will avail
themselves of [the rights]._ Unfortunately our people have
not conducted their business in China as other nations do,
especially the Japanese and Germans, establishing direct
relations with their customers.” Most of America's trade
was handled by Japanese or foreign firms, Rockhill continued,
and our interest in products ceased the day they left the
factories or American ports. ”This apparent ladk of
interest is recognized by American business men with Whom
I have spoken as deplorably short sighted and discriminates
more against us than any other cause, be it Japanese or
Chinese.”31

[The American ambassador in TOkyo, Luke E. Wright, was
of another opinion. iHe felt the Manchurian market was
decidedly limited in 1906. ”Even when Manchuria is opened
to the trade of the world, I am inclined to think that the
demand for foreign goods will be very disappointing for the
reason that the territory has been thoroughly devastated

, . . . - "3
by the two great armies carrying on their operations therein.

 

31Papers Relating to the Foreign Relations of the
United States, 1906 (washington, 1907), pp. 255-56; Paul A.
Varg, Qpen Door Diplomat: The Life of w; w. Rockhill
(Urbana, 1952), pp. 83-90.

32§oreign Relations, 1906, p. 217.

81

In the same year the consul general in Shanghai was
anxious to dispel some of the rosy dreams about the China
market.

There has been and there will be an enormous market

in China for foreign goods. Furthermore it will

grow greater as the slow but sure inroad of the

foreign merchant and his ware progresses. But for

the present at least it must be understood that

this market is open to a limited few who produce

the things wanted and that education is required

before there can be anything approximating a

general market.33
He pointed out that China had an ancient and conservative
civilization and did not readily take to new products.
Even in Shanghai, the center of foreign settlement, there
were few foreign goods on show in the shops. Few Chinese
wore foreign clothes, or used imported agricultural
instruments.

The same problem, a lack of business initiative and
inherent limitations in the market, were noted again in
1911 in special reports on the markets for cotton and
railway materials. One drawback of American cotton was its
high cost.

As a rule American fabrics are too good for the

market and decreased sales are due almost alto-
gether to the refusal of American cotton

 

33Consular Reports,Shanghai, vol. 53, No. 91;

See also Remer, Trade, 234-7.

82

manufacturers to adapt their goods to the trade,
to pack goods according to the market needs, and
to meet competition in other ways.34
The author of the special report added the comment that
foreign cotton merchants in China
. . . state frankly that the cotton—goods market
in the United States is so great, its demand so
steady, the prices it pays so good, and its
consumption so broad that American manufacturers
will give no more than passing interest to any
foreign market and will not make the effort
necessary to secure foreign business until home
conditions turn against them.35
He adds the usual word of caution, however, that they must
not neglect the future.

The railways which were to help increase the avail-
ability of the China market did not necessarily work that
way. The cost of transportation often added enough to the
cost of an article to price it out of the market. Most
imported goods were sold near the port of entry.

In surveying the market for railway materials the
same author had similar conclusions. ”At present there is
an impression among foreigners in and about China that the

opportunities for the sale of foreign goods is vastly over-

estimated.”36 The money expended was out of proportion to

 

34Anderson, Cotton Goods, p. 15.

35Anderson, Cotton Goods, p. 30.

36Anderson, Railway, p. 30.

83

the business received. Perhaps this fact was better known
than he realized and explains why American business was not
more active in China. Yet he continued to hold out the
carrot of the future, for he went on to say that businessmen
should not give up. Only those in the market would be able
to share in future benefits. The orders for materials
usually went to the firm or the country of the consulting
engineer.

It will be seen from the figures of American investment
and trade that while America had a small economic stake in
China, it was in no respect one that would necessarily be
decisive in determining political action, except in so far
as America was acting with an eye to the future. At the
turn of the century her business investments were with one
exception small; her efforts to increase her investments
were made largely to control future markets and to gain
political influence. Her trade was of somewhat greater
importance, but never so vast that it would constitute a
sole motive for political action. And with the possible
exception of the cotton industry, the China trade was never

of decisive importance to the domestic economy.

CHAPTER IV
JOHN HAY AND THE FAR EAST

The Open Door Notes of 1899 were one expression of
America's wider participation in world affairs. Previous
to that time American activity in China had been confined to
spasmodic efforts to support trading rights and mission work,
and by and large she followed the lead of the European
powers. Those who adopted the economic theory of imperialism
have regarded the Open Door Notes as but an extension of the
previous efforts to help trade. Even many who have taken a
more complex View of the roots of imperialism have clung to
the idea that the Notes were solely designed to guarantee
equality of commercial opportunity in a nation that was
threatened with partition.l

It is true that the Notes were widely supported by
commercial groups interested in China2 and certainly the
framers of the Notes were aware of the commercial importance
of the policy, but there is much evidence to show that
commercial benefit was not the sole or even the first

consideration. The Notes were the result of the wider View

 

lLanger, p. 687.

2Campbell, pp. 33-59, passim.

84

85

of America's role in the world that was expressed by
publicists like Brodks Adams, Mahan and others. Concepts
of prestige, strategy and balance of power entered the
picture. Wide political considerations required the
territorial and administrative integrity of China.

Moreover, the economic historians often overlooked
another pressure group in America that was at least as
influential on public opinion as the business interests,
namely the missionary societies. In 1900 there were some
thousand to fifteen hundred missionaries in China with
mission properties valued at something like $5 million;3
and Americans at home contributed another $5 million in
support of spreading the gospel in China. This material
investment was but an outward expression of a deep spiritual
interest. Whatever the justice of their cause, American
Christians cared deeply about saving Chinese souls and they
too looked to government for help.

John Hay, the man who at the time was widely credited

with "saving” China,5 has been represented as the spokesman

 

3Remer, Investments, p. 251; A. Whitney Griswold,
The Far Eastern Policy of the United States (New York, 1938),
p. 61.

4Varg, p. 28.

5Tyler Dennett, John Hay; From Poetry to Politics
(New York, 1933), p. 295; Henry Adams, Education, p. 392.

86

for big business in the era of the robber barons. It is

true that his father-in—law introduced him to the business
world, and by his marriage he became a wealthy man. He was
at heart a conservative, not given to underdog causes and
distrustful of labor, as he showed in his novel, The
Breadwinners.6 But an equally strong portrait could be drawn
of Hay as poet and dilettante. In his early years he became
a noted poet and writer. After his marriage he became a
businessman, but he abandoned the tedious society of Cleveland
as soon as he could for the brighter world of Washington,
where for a decade he held no public or business post.

During his later life his closest associate was Henry Adams,
no lover of American commercial values. Hay's biographer
referred to Hay, Adams and Clarence King as ”a select circle
of those who had retired from the game.".7 Another close
friend, Sir Cecil Spring Rice, in 1887 referred to Hay as
"the poet” and ”the best story teller I have ever heard,"8
not as a financier or businessman. Roosevelt, even in the
later years when he had many reservations about Hay as a

statesman, referred to him as ”the most delightful man to

 

6Dennett, pp. 240, 107-18.

7Dennett, p. 160; see also Henry Adams, Education,
pp. 106, 315, passim.

 

8 . .
Spring Rice Letters, I, p. 81.

87

talk to I ever met."9 Of course, neither of these extremes,
Hay as robber baron or Hay as dilettante, ix; the whole
picture. One must add the concepts of Hay as newspaperman,
Hay as admirer of Lincoln, Hay as junior diplomat, Hay as
loyal Republican.

Hay has not left so complete a public record as some
of his friends of his View of the world scene. Because of
his intimacy with the Adams brothers, Mahan, Spring Rice and
to some extent Roosevelt, one can imagine him taking part
in luncheon conversations that surveyed the world scene in
terms of an ideology similar to that of their books. He
was, however, more of a pragmatist than theorist. He was
a ”day to day man,"; whereas Henry Adams was interested in
the influence of the past, Hay was more concerned with the
present.1

Hay believed strongly in Anglo-American cooperation.
He spent much of his term of office ironing out the
differences between the two nations, and was accused of being

an Anglophile for his pains. Behind his desire for practical

 

9The Letters of TheodonaRoosevelt, ed. Elting E.
Morison, John M. Blum, John F. Buckley, 8 Vols. (Cambridge,
Mass., 1951), VI, p. 1489.

10Dennett, pp. 165—66, 189. It should be noted that
despite their similarity of outlook in world affairs, Henry
Adams was a Democrat.

88

political cooperation with Britain, lay the belief in the
Anglo-Saxon mission and the white man's burden. In one of
his few public addresses, to a Lord Mayor's dinner in London
in 1898, Hay spoke of Anglo-American relations:

All of us who think cannot but see that there is a
sanction like that of religion which binds us to a
sort of partnership in the beneficent work of the
world . . . . we are bound by a tie which we did
not forge and which we cannot break; we are joint
ministers of the same sacred mission of liberty and
progress, charged with duties we cannot evade by
the imposition of irresistable hands.ll

Hay regarded it as a ”cosmictendency,’ whatever
the immediate issue, that America would take a larger role
in world affairs. This was the spirit of the age. Not
only was expansion inevitable, but he believed it was a
positive good, not a crass economic necessity. Growth was
a ”fine expression of the American spirit” and a beneficent
force in the world.12 ”When a nation exists,” Hay wrote,
"founded in righteousness and justice whose object and
purposes are the welfare of humanity, the things that make
for its growth and the increase of its power, so long as it

. . .13
is true to its ideals, are sure to come to pass . . .'

 

11Quoted in Dennett, p. 189. See also Dennett,
pp. 212-13, 218-23, 240-41; Roosevelt Letters, VI, p. 1497.

12Dennett, p. 220.

13Quoted in Dennett, p. 278.

89

With such a view of history, an idealistic overtone to a
China policy would certainly appeal to Hay.

Hay was distrustful of Germany and anti-Russian.l4
His thinking probably resembled that of Spring Rice in
regarding the world scene as a battle between the tyrannies
and the democracies.

While Hay believed in expansion, in general, his
precise reasons for the open door policy can only be guessed
at. At the end of August, 1899, he asked Rockhill to
"submit the project to him on the steps which should be
taken by the United States at once to insure our commercial
interests.”15 This was evidently in response to the agitation
that was going on among United States business interests to
"do something” about China. It is clear that this pressure
merely provided a political opportunity for Hay to act
rather than forcing him to act, for he had favored a
statement on the open door ever since the British government
had suggested a joint statement in March,1898. His precise

motives for supporting the British suggestion in 1898 are

 

l4Dennett, p. 384-87; Roosevelt Letters, VI, p. 1497;
Griswold, pp. 55, 60.

15Quoted by Harvey Pressman, ”Hay, Rockhill and
China's Integrity, a Reappraisal,” Papers on China, from the
East Asia Regional Studies Program, Harvard University,
‘Vol. 13 (December, 1959), p. 67.

90

not known but since he was in London—-or more precisely
Egypt—-at the time, it may be assumed that his support of
the British move was not in direct response to American
business pressure. It was far more likely part of his
general belief in Anglo-American cooperation.l6
It is recognized today that the Open Door policy
‘was not so distinctly Hay's work as his contemporaries
believed. And if there is some question whether Hay was
motivated by a commercial outlook, there is little room for
doubt that his chief adviser on Far Eastern matters, William
W. Rockhill, was not personally interested in commercial
advantage. He had joined the diplomatic corps in Peking in
order to study Tibetan and left when his superior felt his
studies were interfering with his work. He had a strong
interest and attachment to oriental civilization, though he
was by no means sentimental about China. His attitude could
perhaps best be defined as paternalistic. Well aware of
the corruption of the Chinese government, he felt that the

Chinese should be pressed to reform.17 However, saving

China for its own sake was not his only consideration.

 

l6Dennett, pp. 285-86; Griswold, pp. 43-46, 51-52.

l7Varg, pp. 11-13, 29-30, 120-21.

91

The United States had now spread across the continent
to the Pacific coast and already had a foothold in the
Philippines. To maintain a strong hand in the Pacific it
was important to keep the European powers and their long-
standing feuds at arms length. Americans were already
concerned about the meeting of Russia and America. In 1867
we had acquired Alaska from Russia.

'With the acquisition of the Philippines, Rockhill
said, ”the maintenance of the balance of power in Asia, in
which the integrity of the Chinese Empire was of paramount
importance, acquired sudden and great interest for us, and
that the logical policy of the United States would be to
insure its maintenance became at once apparent to all.”18
A few years later the war scare of 1907 from a newly powerful
Japan showed how alive Americans were to a threat on their
flank from the other side of the Pacific.

The third person directly involved in the Open Door
Notes was the Englishman, Alfred E. Hippisley. Although

Griswold maintains that Hippisley was anxious to enroll

America's support for Britain's policy of the open door19

 

18Speech entitled ”The Open Door" delivered Feb. 19,
1900, quoted in Pressman, p. 72.

92

it seems more likely in view of the fact that he had been
in China with the Maritime Customs since 186720 that he was
concerned with China for its own sake. He certainly had no
interest in promoting American business. George Kennan even
felt that Hippisley was directing his policy against Britain,
which was not acting fairly in customs dealings with China.21
Certainly there was much indication that Britain had abandoned
the policy of the Open Door. In response to the Russian
seizure of Port Arthur, the British took Weiheiwei, and
the Anglo-Russian railway agreement of 1899 was a frank
recognition of spheres of influence in China.

A little later the Anglo-German Agreement of 1900
and the Anglo-Japanese Alliance gave a further indication
that Britain had abandoned a clear cut policy of the open
door. The Anglo-German agreement, while proclaiming the
open door, in effect gave each country a right to share in
the other's sphere of influence, and by excluding Manchuria
appeared to recognize Russia's rights there. The Anglo-

Japanese Alliance in effect gave Japan a free hand in Korea,

and made no commitment to preserve Manchuria. Rockhill

 

20Varg, p. 29

21George F. Kennan, American Diplomacy 1900-1950
(Chicago, 1951), pp. 27-32, 36.

93

considered England to be as great an offender in China as
Russia herself.22

President McKinley's conversion to the more active
policy in China was the final and decisive step in its
execution. He was evidently convinced by the arguments put
forth by Jacob Gould Schurman on his return from the
Philippines and by those of the Rockhill memorandum, and he
was encouraged to hope for the success of the policy by the
Tsar's ukase making Talienwan a free port.

The evolution and purpose of the Open Door Notes
can be seen in the Hippisley-Rockhill correspondence of July
and August, 1899. This correspondence makes it clear that
Hippisley was anxious to prevent further encroachment on
Chinese territorial integrity but realized the existing
spheres could not be abolished. He first proposed that the
Chinese treaty tariff should apply to all merchandise entering
the spheres of influence and that the treaty ports should
not be interfered with.24 Rockhill stated clearly in his
reply that he ”would like it [the United States] to make
a declaration in some form or other which would be understood

by China as a pledge on our part to assist in maintaining

 

22Langer, pp. 777, 782; Varg, p. 29.
23 .
Griswold, pp. 68—72.

24Griswold, pp. 65—66.

94

the integrity of the Empire."25 Rockhill was dubious whether
the administration was ready to take such a step. The best
that could be devised was to add to the first measures
proposed by Hippisley the extra proviso that China herself
should collect the treaty tariff in the spheres of influence.
This would serve to strengthen the Chinese administrative
control in her own territory.2

The purpose of the Open Door Notes was expressed
in Rockhill's memorandum to Hay setting forth the proposals.
Such an agreement would, he said: (1) secure an open market
throughout China; (2) remove a source of conflict between
the Powers and so help to re-establish confidence; (3)7Prepare
the way for concerted action by the Powers to bring about the

reforms in Chinese administration and the strengthening of

 

25Griswold, p. 67.

26Varg argues that Hippisley added this proviso in
response to Rockhill's desire to make some sort of declaration
in support of China's territorial and administrative integrity
(p. 32). Pressman argues that Hippisley was not influenced
by Rockhill in this suggestion and did not intend that this
proviso be a step to ensure the integrity of China, but had
expected the American government to make an entirely separate
statement to this effect (PP. 68-72). 'What Hippisley
intended by the statement is perhaps immaterial to an under-
standing of the intentions of American policy. It is how
Rockhill interpreted Hippisley's suggestion that is important.
From his memorandum to Hay of August 23, 1899, it seems
clear that he had accepted the Chinese collection of the
tarrif as a means to save Chinese jurisdiction in the spheres.

95

the Imperial Government recognized on all sides as essential

to the maintenance of peace,”; and (4) "It furthermore has

the advantage of insuring to the United States the appreciation
of the Chinese government who would see in it a strong

desire to arrest the disintegration of the Empire and would

greatly add to our prestige and influence in Peking.”27

The purpose is again stated clearly in the letter
sent by Ambassador Choate to Lord Salisbury in which the
proposal for the open door is given. Choate's letter is a
paraphrase of Hay's letter to Choate. After an introductory
paragraph about commercial rights in China, he states:

While the Government of the United States will in no
way commit itself to any recognition of the exclusive
rights of any power within or control over any
portion of the Chinese Empire, under such agreements
as have recently been made, it cannot conceal its
apprehension that there is danger of complications
arising between the treaty powers which may imperil
the rights insured to the United States by its
treaties with China.

It is the sincere desire of my Government that
the interests of its citizens may not be prejudiced
through exclusive treatment by any of the controlling
powers within their respective spheres of interests
in China, and it hopes to retain there an open
market for all the world's commerce, remove dangerous
sources of international irritation, and thereby
hasten united action of the powers at Peking to
promote administrative reforms so greatly needed
for strengthening the Imperial Government and
maintaining the integrity of China, in which it

believes the whole Western world is alike concerned.28

 

27Diplomacy, ed. Williams.pp. 436—40.

28Foreign Relations, 1899, PP. 133-34.

96

Another indication that the United States intended
the notes to go further than upholding commercial rights
was a statement Hay made to Minister Conger in Peking,
March 22, 1900. In telling Conger to press the Chinese
government to protect foreigners from the Boxers, Hay said:

In submitting this to the Yamen you will avail your-
self of every opportunity to impress upon it that
this Government, by the recent assurances which it
has obtained from the various great powers holding
leased territory or areas of influence in China,
concerning freedom of trade in said regions and the
maintenance therein of China's rights of sovereignty,
has obtained thereby a renewed assurance of the
policy of the treaty powers not to interfere with the
integrity of the Chinese Empire.29

Since the Open Door Notes themselves were intended
to gain support for the territorial and administrative
integrity of China, the circular of July 3, 1900, was
simply a clearer statement of a policy already in effect
rather than a new departure made necessary to protect
commerce from the new threat of China's partition as a
result of the Boxer rebellion.

Throughout the Boxer Rebellion and the ensuing
negotiations, America tried hard to be fair to China

while protecting her own nationals in China. In the early

days of the Boxer attacks, Hay even went so far as to make

 

29Foreign Relations, 1900, p. 111.

97

sure that the Christians had at no time provoked the Boxers.3O
Conditions in China by July, 1900, were so chaotic
that there was danger that the Great Powers, particularly
Russia, would use the suppression of the Boxer revolt and
the rescue of the legations in Peking as an excuse to take
over slices of Chinese territory. Since America had troops
in China, it is conceivable that she herself could have
established a sphere.31 Instead she exerted what pressure she
could to uphold the territorial and administrative integrity
of China. This was done not only by the July Circular
rejecting any intention of annexing territory, but also by
maintaining the fiction that America was not at war with
China but only with the Boxers, and by isolating the fighting
to the North through the assistance of the Viceroys of
Nanking and Hankow. It was at the instigation of these
Viceroys that America continued to recognize the Manchu
dynasty on the condition that officials guilty of abetting
the Boxers be punished. The Viceroys maintained that any

attack on the Manchus would bring war to all China.32

 

30Foreign Relations, 1900, p. 111.

31That this was not a totally remote possibility was
shown by Hay's endeavors to get a naval base at Samsah Bay
in November, 1900.

2Consular Reports, Shanghai, Vols. 46 and 47 passim;

Chester C. Tan, The Boxer Catastrophe (New York, 1955),
pp. 83-91; Dennett, p. 299.

 

98

During the long, tedious and complicated negotiations
for the Boxer protocol, Rockhill as the United States
Commissioner, continued to fight for the American policy,
and to use the occasion to press for reforms. He was not
entirely successful. In a report to the Senate he summarized
his accomplishments on four main issues.33 First, America
believed that China herself should determine the punishment
for guilty officials once the chief culprits were punished.
Rockhill did manage to hold within bounds the lengthy list
of culprits the Powers submitted to China for punishment.
Secondly, America opposed any plan that promised long
occupation of China by foreign troops or the creation of an
international fort in Peking. America preferred to see a
strong Chinese government which could be held responsible
for maintaining order. This was partly on the pragmatic
ground that foreign troops could not protect all foreign
property in China under any circumstances.34 In this aim
America was successful. As a third point, America was

anxious for changes in court ceremonial and the creation of

 

33Foreign Relations, 1901 Appendix, pp. 3-7.

 

34Foreign Relations, 1901 Appendix, p. 82. As early
as August, 1900, the American Minister in Peking had shown
concern at the hardship foreign troops would bring to China
because of the food shortage and later he stated their with-
drawal would benefit China. Foreign Relations, 1900,
pp. 199, 240.

99

a ministry of foreign affairs to facilitate China's relations
with foreign powers. On this she also gained her point.
On a fourth point America was not so successful. She wanted
the indemnity to be paid to the Powers set at a lump sum to
include the claims of all powers and not to exceed the
ability of China to pay. The indemnity would then be divided
among the Powers in proportion to their losses. America
also wanted the debt paid by bonds at 3 per cent over a
thirty to forty year period; to be secured in such a way
that they did not create a financial crisis for China and so
endanger her control over her own finances. This last point
was the most crucial and most controversial, and the one
most connected with the integrity of China. Although
Rockhill was able to get a fixed sum established, he was
not able to keep the indemnity within the sum America
considered reasonable because she was supported in this only
by Japan. America also secured payment by bonds, but the
rate of interest was revised upward to accommodate Japanese
objections. The Powers were anxious to secure the indemnity
by an increase of the customs tariff.
. . . The United States mindful of the furtherance of
lawful commerce in China in the interests of the world
and believing that no opportunity should be lost to
secure to foreign trade all the facilities its vast

importance entitles it to, and that any additional
tax on trade should be met by commercial compensation

100

on the part of China of equal value, declined to

consent to the above increase [to 5 per cent] of

the customs tariff on imports unless (1) all the

treaty powers and China agree to cooperate in the

long desired improvement of the water approaches to

Shanghai and Tientsin and (2) that specific duties

should be substituted to the present ad volarem ones

in the tariff on foreign imports. Both of these

conditions were ultimately agreed upon.35

Rockhill had little support in his efforts to use

the opportunity afforded by this general discussion of
Chinese finances to press for reforms in Chinese trade
practices. For decades foreigners had complained about the
vagaries of Chinese internal taxes, particularly the likin.
Rockhill opposed any increase in China's tariff until there
were compensating reforms in the likin. He was also anxious
to gain the right for foreigners to reside in the interior,
to revise the inland navigation rules, and to have the
Chinese create a bureau of mines.36 Russia, France and
Germany were more interested in territory than in trade with

the interior, and wanted the tariff raised to provide revenue

more quickly for the payment of the indemnity. Although

 

35Foreign Relations, 1901 Appendix, p. 6. It todk
another five years to set up the Whangpo Conservancy Board
to improve the water approaches to Shanghai. The final
obstacle was China's desire to undertake the task herself,
and the United States supported her in this aim. Consular
Reports, Shanghai, Vol. 50, No. 579; vol. 52, No. 86 passim.

36ForeignRelations, 1901 Appendix, pp. 190-91.

101

Britain opposed Russia's suggestion for raising the tariff
to 10 per cent ad valorem, she accepted a raise to 5 per
cent without compensating commercial advantages, thus giving
Rockhill little support in his efforts. The exigencies of
European politics, always in the background of Far Eastern
affairs, impelled England to cooperate with Germany on this
issue, as well as on the question of the size of the
indemnity.37

On the surface America's efforts for the abolition
of the likin might well be conceived as another attempt to
gain advantage for American commercial interests. But if it
helped American trade, it would also strengthen China's
administration by setting her finances on a sounder basis.
Any increase in her trade would raise her revenues. However,
there is some evidence that American merchants did not care
about the abolition of the likin. In 1902 when the powers
were meeting to work out the revision of the Chinese treaty
tariff, a group of American businessmen met in Shanghai to
consider the question, and opposed the proposal to increase

the Imperial CustomStxalS per cent ad valorem in consideration

of the abolition of the likin. They pointed out that most

 

37Foreign Relations, 1901 Appendix, pp. 169, 171-73,
175, 227-29, 252-53, 275-78.

102

of the likin was collected in Central and Southern China,
whereas most American trade was in the North. The net
effect of the proposal would be to raise rates for American
goods at entry with no compensating advantage in transit.
There was an added reason in their cynical belief that
should the likin be abolished, a worse tax would take its
place.

America's major diplomatic task during the Boxer
negotiations had been to hold the powers together in a
unified front to deal with China in order to prevent separate
agreements by each at the expense of China. One indication
of America's willingness to give up immediate advantage for
the purpose of maintaining a united front is indicated in a
report by Rockhill.

It has been rumored here of late that some American
capitalists were willing to supply China with all the
money she might need in her present embarrassment, on
condition that the administration of certain of
China's present revenues be farmed out to them for

an extended term of years. Any such attempt to secure
control over the large part of China's revenues and
thereby over the Government of China, would be
strongly opposed by all the other powers out here,
and I think not unnaturally. So strong I think

would be the opposition that it seems to me it

would be quite impossible to carry out this plan.

The development of China's resources and improvement
in her methods of administration will tend more than

 

38Consular Reports, Shanghai, Vol. 48, No. 389.

103

anything else to increase her commerce, and will,

therefore, be ultimately much more beneficial to

us and the world at large than any other plan

which can be thought of for the settlement of

its new financial obligations.39
Although Rockhill's remarks were instigated by a rumor only,
they are evidence that he was not interested in helping
American capitalists at the expense of China and cooperation
with the Powers.

The policy of cooperation was considerably hindered
by the considerations of European politics which were ever
present in the minds of all but Japan. England in particular
was in an exposed diplomatic position, and had been searching
for allies since 1898.40 She was no longer strong enough
in the East to dominate the situation single handed. She
was faced with Russian opposition throughout the Middle
East and India, and tried to cooperate with Germany in
Chinese affairs. This limited cooperation found expression
in the Anglo-German agreement of October 1900. Russia was
a dominant force in Europe, strengthened by her French
alliance, and as the only European power contiguous to

China she held a particularly strong position, although the

Trans-Siberian Railway was not completed until 1903 and

 

39Foreign Relations, 1901 Appendix, pp. 113-14.

4OGriswold, pp. 37-47; Langer, pp. 461—80.

104

the Russian population was not large in Eastern Siberia.
Germany was also in a weak diplomatic position, and vacillated
between reaching an agreement with England and with Russia.41
Although she cooperated with England in China, Germany also
was anxious to placate Russia, and to encourage her Far
Eastern ambitions in order to divert her attention from
European affairs. Germany was so arrogant with her military
maneuvers and her demands for indemnity that China felt
she had to lean on Russia for support. Japan was already
concerned about Russian intentions in the Far East and urged
China to resist the Russian demands.42 Japan had not yet
become a major power and stood to gain more by an open
door policy in China than by any partition. She was the
only power to give any support to the American position in
the Boxer negotiations, It was perhaps because of this
support that Americans were slow to believe in Japan's
aggressive intentions after the Russo-Japanese war.

During and after the Boxer negotiations, Russian
encroachments in Manchuria presented an immediate challenge
to the Open Door policy. During the negotiations Russia

used her strong diplomatic and strategic position to try and

 

41Langer, pp. 700-05.

42Tan. pp. 175—76, 199, 206-13.

105

reach a separate agreement with China concerning her position
in Manchuria.

She had used the excuse of the Boxer outbreaks to
take military control of Manchuria, ostensibly to protect
her railroad, and by October, 1900, had control of the three
Eastern provinces. The Tseng—Alexeiev agreement of November,
1900, was the first fruit of Russia's efforts for a separate
agreement. When the Chinese refused to accept this agreement,
Russia's demands were revised in the new year. Japan was
the most vocal opponent of these demands, protesting both
to China and to Russia, and Britain joined in protesting to
China. Japan, worried about the future of Korea should
Russia gain control of Manchuria, was even ready to go to
war with Russia if she could be assured of British and German
support should France come to the aid of her ally, Russia.
Although Britain did not agree at this time (March, 1901),
Japan's attitude provided the seed for the Anglo—Japanese
Alliance which was concluded a year later.43

Within China the Viceroys of Nanking and Hankow,
who had kept open the channels of communication with the
Powers during the Boxer revolt, again served as a link with

the Powers and urged the United States to join the British—

Japanese protests. They also pressed their own government

 

43Langer, pp. 695-96, 711, 716-23; Tan, pp. 206-10.

106

to resist Russian demands.44 The opposition of these Viceroys
to Russian encroachment in these years might be considered
an early indication of the rising nationalism in China.
Under the pressures of the Viceroys and the Powers, the
Chinese Government refused the Russian demands for an agree-
ment until after the Boxer protocol had been settled.

Russia was forced to back down on her demands but
her troops remained in Manchuria. A tentative agreement in
October, 1901, was rejected by China, and the death of the
Chinese statesman Li Hung Chang in November further delayed
agreement. Moreover through 1901 the Russians themselves
were vacillating between the policies of aggression and
retraction, and were awaiting the outcome of negotiations
with the Japanese for an accord on Korea and Manchuria.
The Japanese, however, finally rejected a Russian rapprochement
in favor of the English alliance.45

Again in January, 1902, the Russians and Chinese
were about to reach agreement on the terms for the evacuation
f of Manchuria, only to have the Chinese reject the proposals
after protests, this time from the United States. In

April, 1902, agreement was finally reached by which the

 

44Tan, p. 193.

45Langer, pp. 723, 748-49, 751, 763-71.

107

Russian withdrawal was to take place in three phases. Only
the first phase, in October, 1902, was accomplished due to
the changes in policy of the Russian government. By the
time designated for the second withdrawal, April, 1903, the
Russians were making new demands on China.46
Against this background of these events, America
began to take a more active part in Manchuria. In the
years from 1898 her interest in Manchuria had grown with
the increase in her trade in that region. This trade, though
not large, had increased phenomenally. American goods
represented about half the foreign trade in the port of
Newchwang. Commercial affairs there had been in the hands
of an Englishman, but it was felt that an American would be
more diligent in furthering American commerce. In a report
giving a variety of statistics to show the rapid growth of
trade from 1897 to 1899, the consul at Chungking also noted
the political problems of Russia's presence. ”That section
of China has become a center of considerable political
importance,” he wrote, ”and our country should have a

representative there to guard both our industrial and

political interests. We have consulates in China at points

 

46Langer, p. 781; Foreign Relations, 1903, pp. 53-54.

108

where our commercial and political affairs are not nearly as
extensive as at Newchwang.”47 This view was supported by the
American Association of China. "Unless speedy action is
taken, the development of present conditions will strongly
threaten our commercial future in Manchuria."48 With the
designation of Henry B. Miller as consul at Newchwang in
June, 1901, America had an official observer on the spot.
Through 1902 and 1903 reports began to come in
concerning Russian interference with business operations.
In 1902 there were complaints about Russian control of the
telegraph system.49 By March, 1903, it was noted that
Russian goods were entering Manchuria free of Chinese
customs; that they were applying discriminatory rail rates;
that Russia was setting up her own courts and forcing
Americans to be tried in these rather than the consular
courts.50 However, in addition to preserving American trade
in Manchuria, America was genuinely anxious to break the

Russian hold in the Eastern provinces. There was no

 

47Consular Reports, Shanghai, Vol. 47, Nov. 27, 1900,
enclosing a report from Henry B. Miller at Chungking.

48Consular Reports, Shanghai, Vol. 47, Dec. 4, 1900.

49Consular Reports, Shanghai, Vol. 48, Jan. 21, 1903;
Foreign Relations, 1902, pp. 916-26.

50Foreign Relations, 1903. Pp- 48—51.

109

consideration of a policy of appeasing Russia in exchange
for economic entrance into Manchuria.

Through 1901 and 1902 the United States relied mainly
on protests to China about making any agreement that infringed
on American rights. In December, 1901, Conger reported
that Russia and China had reached an agreement for a three-
phased evacuation of Manchuria, and that England and Japan
had urged the Chinese not to sign. Hay replied that the
United States must expect China to make no treaty that
impaired her territorial integrity or interfered with the
legitimate interests of the United States. By January, 1902,
China had accepted the agreement with Russia which permitted
China to develop Manchuria herself but stipulated that if
outside capital should be needed (which surely would be the
case) she must apply first to the Russo-Chinese Bank. The
open door was to be maintained at the Treaty ports. Conger
again cautioned the Chinese to uphold the treaty rights of
other powers; Britain and Japan had also protested. In
addition, in February Hay sent a memorandum to China, Russia
and the other powers objecting to the award of exclusive
rights to such a corporation as the Russo—Chinese bank.

and pointed out that it impaired China's sovereign rights

 

51William Appleman Williams, American Russian

Relations, 1781-1947 (New York, 1942), pp. 36-37.

110

and her ability to meet her international obligations.52

Hay's policy with respect to Russia's challenge in
Manchuria has been called a retreat from the advanced
position of the July Circular upholding China's territorial
and administrative position to the more modest position of
the Open Door Notes which recognized the spheres of influence.53
Since, as we have seen, the Open Door Notes indicated an
intention to support the territorial and administrative
integrity of China, the July Circular was merely a much
stronger statement of this purpose made in circumstances
when there was a renewed threat to China's integrity, but
also when it was possible to hope for cooperation from the
European Powers whose legations were alike threatened in
Peking. It might be said that the July Circular expressed
a hope rather than an intention to act.

However, it is true that both Hay and Roosevelt
admitted that Russia had special interests in Manchuria
and hoped only to limit the extent of her control of the

region to allow American trade.54 It seems likely that the

 

52Foreign Relations, 1902, pp. 271-75.
53 .
Griswold, p. 84; Bennett. p. 403.
54Griswold, pp. 87-88; Howard K. Beale, Theodore

Roosevelt and the Rise of America to World Power (Baltimore,
1956). pp. 193, 271.

111

shift in emphasis from the July Circular to the Manchurian
policy after the Boxer Protocol reflected the influence of
Roosevelt who had succeeded to the Presidency after the
sending of the Circular. The realistic recognition of the
power situation in 1902-03 was similar to his policy toward
Japan in Korea and Manchuria after the Russo-Japanese war,
and his attitude to Knox's policy in 1910. Roosevelt wrote
in 1903 that

. . we disclaim any intent to interfere with the
political future of Manchuria. All we ask is that
our great and growing trade shall not be interrupted
and that Russia shall keep its solemn promises . . . .

We have always recognized the exceptional position
of Russia in relation to Manchuria. We have done
nothing to interfere with her progress and her
legitimate aspirations. We have only insisted upon
that freedom of access and of opportunity for our
commerce which has been guaranteed to us by the
agreement of the whole civilized world including
Russia . . . .55

He wrote to Hay that though the mendacity of Russia
was appalling, there was little America could do as she
could not as yet fight. "I hate being in the position of

56

seeming to bluster without backing it up."

As Russia continued to hang on in Manchuria and to

threaten,America sought to probe Russian intentions and met

 

55Roosevelt Letters, III, pp. 497-98.

56Roosevelt Letters, 111. p. 478.

112

with persistent denials by the Russians of any demands on
China.57 America's use of force in Manchuria was out of the
question, although Roosevelt was sufficiently angry at
Russia's "mendacity" to consider it. He wrote to Hay in
July, 1903, "And I wish, in Manchuria, to go to the very
limit I think our people will stand. If only we were sure
neither France nor Germany would join in, I should not in the
least mind going to extremes with Russia."58 Since ”extremes"
would have been unacceptable to the American public, Hay
relied on two other instruments to counter the Russian
pressures.

The first was the Anglo-Japanese alliance, signed
in February, 1902, which was directed against Russia. The
Anglophile tendencies of the American policy makers were
sufficiently strong so that this alliance was hailed with
much enthusiasm, and it was some time before it was clear
that it did not always work in the interests of America or
that it did not apply to Manchuria.59 Roosevelt regarded

America as almost a silent partner to the agreement. and

. . O
indeed in 1904 Japan did "fight our battle” against Ru55ia.6

 

57Varg, pp. 52—56.

58Roosevelt Letters. 111. p. 532.

 

59Langer, p. 782.

60Bea1e, p. 171.

113

Ambassador Choate wrote to Hay, "It seems to me greatly to
fortify the policy of the 'open door' and goes far to secure
the independence and integrity of the Chinese and Korean
empires."61

The other instrument of Hay's policy was the Commercial
Treaty of 1903, which like the Open Door Notes had a dual
purpose, to help American trade and to counter political
pressures of other powers, in this case Russia, on China.

The specific device to counter Russia's political
control in Manchuria was the attempt to open new treaty
ports in that region. Russia clearly showed her hand by
making new conditions with China stipulating that China open
no new treaty ports before she evacuated Manchuria. China
also was to employ no foreigners except Russians in her
public services, and the customs collected at Newchwang, the
chief port of entry for American goods, were to be deposited
in the Russo-Chinese bank.62 At the same time Russia
persistently denied in Washington and St. Petersburg that

she had put any such pressure on China. This was the

“mendacity" that so angered Hay and Roosevelt.63 China

 

61Foreign Relations, 1902, p. 513.
62 . .
Foreign Relations, 1903, p. 53.

63Foreign Relations. 1903, p. 56 ff; varg, pp. 51-58.

114

refused Russia's demands, but she also refused to make the
agreement with America on the excuse that she could not open
new ports until the Russians had evacuated Manchuria.64
America refused to accept such a condition, insisting that
"China has the recognized right to open whatever ports

she pleased in her sovereign territory.”65 America was

ready to delay signing the treaty until October 8, the day
the Russians were supposed to begin withdrawal from Manchuria.
provided the article designating the treaty ports was written
into the Commercial Treaty and was not made a separate
agreement, as China had wanted. The opening of the ports

was not to be dependent on the Russian withdrawal, however.66
The treaty opened Antung and Mukden to foreign trade.

America had worked to include Harbin, a Russian stronghold,
but China refused.

A discussion of Hay's policy in China is not complete
without some consideration of the case of the American China
Development Company which actually spanned several adminis-
trations. This episode is frequently cited by economic

historians in support of their thesis that American policy

 

64Foreign Relations, 1903, p. 66.
65 . .
Foreign Relations, 1903, p. 71

66Foreign Relations. 1903, pp. 70, 71-73.

115

was designed solely to further American economic interests
in China. The case was certainly damaging to American
relations with China, but there are many ambiguities con-
cerning the government's precise intentions, and even though
America supported the company, there is no evidence that she
did so because surplus capital threatened the domestic
economy.

The American China Development Company was incor-
porated under New Jersey law in December, 1895, with the
purpose of financing Chinese railways. A number of prominent
financiers were stockholders. It began to negotiate with
the Chinese government in 1896. Charles Denby, the American
Minister in Peking, wanted to support American business in
China but was restricted by his instructions from‘Washington.
These instructions varied with the changes of Secretaries of
State from a hands—off policy to a specific promise to
assist American firms if their activity was not detrimental
to other American companies. After the company had made its
preliminary contract in April, 1898, to build a railway from
Hankow to Canton, it sought State Department help to
protect the concession against foreign interference, parti-
cularly by France. Secretary of State Day refused on the

ground that "the American government had always declined to

116

guarantee private contracts with foreign powers."67

Soon after the preliminary agreement was signed the
company found that more money would be required than
originally anticipated, and while surveys were being made
of the route, negotiations were resumed to write a supple-
mentary agreement. The company wanted to take this
opportunity to gain extensive mining rights and concessions
for branch lines, but the Chinese opposed these requests.
Sheng Hsuan—Huai, Director General of the Chinese Railway
Bureau, was anxious to reach agreement with the Americans,
however, to prevent the concession from falling to either
the British or the Belgians. In July, 1899, the company
appealed to Hay, who had become Secretary of State, to
back up their efforts. On July 14 Hay cabled Conger to use
his good offices on behalf of the company and to protect
American rights, but he also warned against doing wrong
to China.68 Whether Hay was more concerned to push
American business or to promote American prestige and

influence in China, his instruction indicates that he did

 

67William R. Braisted, ”The United States and the

American China Development Company,” Far Eastern Quarterly
vol. XI (February, 1952). p. 150. See also pp. 147-48.

 

68Braisted, p. 152.

117

not want to violate Chinese sovereignty but saw no conflict
between proper business agreements and China's administrative
integrity.

The supplementary agreement was reached in July,
1900, without the extra concessions the company had asked
for. There were rumors at the time, later proved true.
that the Belgians had gained a large share in the company.
although this foreign influence was contrary to the agreement
with China. The State Department might have been alarmed
by the fact that the company's officials refused to answer
China's questions about the rumor, and Conger reported that
it was "generally understood" in Peking that Belgian and
other Europeans held a portion of the company's stock.69
Conger was assured by the company's officials, however, that
the company was still in American hands.

William Barclay Parsons reported to Hay in December,
1901, that the company had been reorganized with himself
as president, and listed the directors who included a number
of foreigners. The Chinese again complained of violations

of the contract. but Hay and Conger continued to support

the company .

 

69Braisted, p. 154.

118

By January 21, 1904, the Chinese insisted that
Belgium had complete control of the company, and Conger
called the activities of the company "outrageous" and likely
to bring "great discredit" on America.70 Parsons still
insisted that the company was directed by Americans. In
March General Whittier, who was regarded by the Chinese as
a tool of the Belgians, was elected president. In May Hay
told the Chinese Minister in Washington that the American
government still supported the company and claimed the sole
right to deal with diplomatic problems affecting the
company, although he reserved the right to withdraw support
should its conduct or organization be changed. Again Hay's
reasons for continued support are not clear. It seems
inconceivable that if his sole interest was in promoting
American business that he would regard supporting dishonest
business as the best means of gaining his end. Perhaps
there was an element of American prestige involved. To
back down at such a late stage would be to confess dishonesty,
although Hay did later withdraw support. Hay probably did
not trust the Chinese reports in the face of the company's
denial of foreign influence; and the fact that he reserved

the right to withdraw support may have indicated suspicions

 

7OBraisted, pp. 154-55.

119

on his part. It must also be remembered that Hay was
frequently ill in his later years in office, and in any

case he hated routine, so that he may not have paid sufficient
attention to the affairs of the American China Development
Company.

When Parsons finally confessed in July, 1904, that
Belgium actually did have a controlling interest, that
"Leopold II failed to distinguish between good business
practices and royal prerogative," and sought the State
Department's help in regaining the Belgian shares, the State
Department put pressure on the Belgians to sell by threatening
to withdraw support from the company. When the company
appealed again for help against Chinese obstructions in
October, Hay told Conger to cease support and let the company
and the Chinese work out their own disagreement. All work
on the line ceased in October, 1904, after only ten miles
had been built.71 Thus Hay, belatedly, did withdraw
support from the American China Development Company when
he became convinced that it had broken its contract by
admitting Belgian interests.

When in January, 1905, Hay learned that J. P. Morgan

had succeeded in buying back enough Belgian shares to give

 

71Braisted, pp. 156-57.

120

American stockholders a majority, he again backed the

company. But the Chinese, in the face of strong protests
from the two provinces through which the road was to run,
had determined to end the concession, and in May negotiations
began between representatives of the company and the Chinese
Minister in Washington for cancellation of the contract and
to compensate the company for its losses. Compensation was
set at the excessively high figure of $6,750,000. The

0

administration was understandably concerned about the damage

this would do to America's reputation in China.72
Hay had by this time left the State Department in

his final illness, and the problem of the American China

Development Company fell to Roosevelt and Rockhill.

Roosevelt was already concerned in Far Eastern Affairs through

the Russo-Japanese peace negotiations, and Rockhill had

just taken up his post as Minister to Peking. In their

minds American prestige was definitely involved. Rockhill

wanted the government to prevent the company selling out

at such a usurious price, but he admitted that the Chinese

had entirely lost confidence in the company as it was then

 

72Braisted, pp. 158-59. See also Consular Reports,
Shanghai, vol. 50, Nos. 570, 588, for reports of the
protests in Hunan and Hupeh provinces.

121

established. He thought the best solution was a reorgani-
zation of the company.

Roosevelt's reaction to the situation was complicated
by his irritation at the Chinese for the manner in which
they chose to handle the situation. They denied in Peking
an intention to cancel the contract while negotiating in
Washington for the sale of the company's rights. Roosevelt
wanted to keep the company in business to teach the Chinese
a lesson and uphold American prestige. He gave his frank
View of the affair a few months later to Whitelaw Reid who
had sent him some press clippings on the Hankow—Canton
railway. The clippings

. . . are not entirely fair to our people. The
original American management is to be condemned because
it finally did permit the road to be absorbed by the
Belgians; but under the management of Pierpont Morgan
enough stock was purchased to give the Americans
control. The Chinese behaved in their usual manner.
the local Viceroy inSisting that the Americans must
sell. while the central government made tearful
complaints about the Americans trying to extort so
much money from them. I found out that one amount
specified had been offered by the Chinese Minister
himself and was only accepted by the Americans on

the Chinese Minister's statement that the concession
had already been revdked.

The Americans were ready to go ahead on China's terms, he

continued, but the Chinese stood firm. He then implied a

 

73Braisted, p. 161; Varg, pp. 93—96.

122

criticism of Hay's management of the affair.
. . . if I had been in closer touch with the workings
of the State Department than was the case until I
had been some years in office, I should have taken
drastic action long ago, both against the American
members of this corporation who had sold out to the
Belgians, and against the Chinese government.74

If Roosevelt had been interested only in furthering
American economic interests in China. he would surely have
accepted an offer by the Chinese for a railway loan in
Manchuria in compensation for the loss of the Hankow-Canton

. 75
railway.

In vain did Roosevelt urge Morgan not to sell the
company to the Chinese.76 Morgan and the stockholders were
not prepared to continue even with government backing. Thus
in this case the government was in the position of urging
the financiers into a project they did not want.

The reluctance of American financiers to undertake
projects in China was further demonstrated by the fact that
at this time the British and French were undertaking a loan

for the Hankow-Chungking railway, and asked if the United

States wanted to take up its option and join the loan. The

 

74Roosevelt Letters. V. pp. 29-30.

7SBeale, p. 209.

76For Roosevelt's letters to Morgan, see Roosevelt

Letters, IV, pp. 1277-79, 1303.

123

State Department advertised the opportunity but found no
interest.77
Whatever the attitude of the American government

toward the American China Development Company while it was
in existence. after its demise American officials seemed to
regard it with nothing but distaste. Already in January,
1904, Conger had called the company a "great discredit” on
the American government and people.78 In September of that
year he reported that the Chinese intended to finance the
Hankow—Chungking line themselves, but if they couldn't
finance it they would seek money from Britain and America.
Conger went on:

I believe the Chinese government is sincere in its

expressed desire to favor American enterprises of

this kind, but the outrageous action of the

American China Development Company with the

Hankow-Canton line has largely destroyed the

faith of the Chinese in our capitalists.79

The history of the American China Development Company

provides on the surface a clear case of pressure by American

 

77Foreign Relations, 1909, pp. 147—48.
78Braisted, p. 155.

79Foreign Relations, 1909, p. 147. Other disparaging
comments about the Company appear in Foreign Relations, 1909,
p. 191; Consular Reports, Vol. 52, July 12, 1905, and
September 25, 1905; Vol. 50, July 23, 1904, on the case of
Boyd versus the American China Development Corporation.

 

124

financiers on the government to support their export of
capital, and of government pressure on the Chinese government
to uphold American business interests. This would clearly
label the case one of imperialist activity within the
Hobson-Lenin definition. However, there are enough unanswered
questions about the transaction to raise some doubt that the
case is so clear out. It is not enough to note the involvement
of prominent financiers to prove the company was somehow
disreputable, and that their major purpose was to export
capital which could find no outlet at home. If this was

the case. why was it necessary to seek Belgian capital to
bolster the company? Why-did Morgan buy the Belgian shares
only to sell the company a few months later? The motives

of the American government do not necessarily support the
theories of the economic interpretation of policy. While
Hay was undoubtedly interested in supporting American
business abroad, his primary consideration appears to have
been to establish American prestige in China. Roosevelt

was clearly motivated by questions of prestige plus a

desire to ”teach China a lesson." By 1905, when Roosevelt
was urging the company to stay on, it was clearly not a

good business proposition, for not only Morgan and the
stockholders wanted to sell out. but were advised to do so

by Elihu Root who was legal adviser to the company. The

125

government may well have had in mind wider problems of a
political nature. China needed capital. Should the
American China Development Corporation give up the concession,
it would probably fall to the Belgians or the British, a
contingency the Chinese had all along been afraid of. In
fact, the option did fall to the British. Certainly this
case points up a whole range of questions concerning inter-
national business relations which the economic historians
tend to overlook. The questions were again posed by the
international banking consortium of later years. If a
country wants to encourage economic development, it must have
capital. This then raised the problem of whether the money
should be borrowed from an individual state, and if so, which
state. or from an international consortium. China usually
chose to borrow from individual countries, balancing her
requests and playing the nations off against each other.
Having selected the nation to borrow from, there was little
choice but to borrow from private sources since governments
did not make a practice of granting loans for commercial
purposes. This, in turn, raised a whole series of problems
concerning the relation of the lending company to its own
government. Should the government of the lending power stay

strictly out of the business affairs of its nationals;

should it support its efforts only when it got into trouble;

126

or should it supervise the loan from its inception? None

of these solutions to this last problem.was adopted by the
American government with any consistency, and none was found
to be entirely satisfactory.

During the years in which John Hay was in charge of
American policy in the Far East, America began to take a
more active role in world affairs. It is maintained by the
economic historians that this role was forced on the country
by economic conditions, and that the Open Door Notes were
designed to gain a share of the China market for America's
surplus goods by keeping the open door for commercial enter-
prises.

A study of the origin of the notes and the subsequent
diplomacy indicate that an additional and even more important
consideration moved America to take a hand in Chinese affairs.
This was the belief that the territorial and administrative
integrity of China was important to protect America's
political and strategic position in the Pacific. The Open
Door Notes were framed with this object in View, in so far
as existing conditions permitted. During the period of the
Boxer Rebellion and the subsequent negotiations America
used her limited force to prevent further weakening of the
Chinese government. The limitation on America's ability

to act was shown most forcibly by Russian encroachments in

127

Manchuria in 1901-03. Faced with Russian intransigence, Hay
resorted again to commercial measures to uphold Chinese
sovereignty in that region.

Hay's policy was based on the assumption that
legitimate trade was not incompatible with upholding the
sovereignty of China, and that by enforcing freedom of trade
and extending its scope, China could be strengthened. While
in general this view is a reasonable one, it overlooked the
peculiar conditions of China in which any move to strengthen
the central government by the use of force from outside
actually weakened it, and in which foreign business dealings
almost inevitably became entangled with Great Power politics.
Such a dilemma was well illustrated in the case of the

American China Development Company.

CHAPTER V

THEODORE ROOSEVELT

While Theodore Roosevelt was in the White House, he
kept a strong hand on foreign affairs, and in the Far East
he became the main policy maker after 1904. Although he
kept within the framework laid down by Hay, there was a
notable change of emphasis. Japan, not China, became the
center of interest. In part this was due to Roosevelt's
own temperament and his ideological concepts, and in part
to the changed circumstances brought about by Japan's rise
to power.

Roosevelt's ideas about Japan fitted into his wider
ideological views of the world, which were akin to those of
Henry and Brooks Adams, Spring Rice and Mahan. There was
the difference that Roosevelt was exuberant and optimistic
whereas both the Adams brothers and sometimes Spring Rice
tended to pessimism. Roosevelt also felt that the individual
could make an impact upon events, although he realized that
the individual was limited by given facts. Much of
Roosevelt's policy was determined by his own moral outlook
and his personal reactiontn individuals. He liked and

trusted the German ambassador Speck von Sternburg. and the

128

129

English diplomat Cecil Spring Rice; he had no respect for
the English Ambassador, Sir Mortimer Durand.l Similarly, he
respected the Japanese and thought the Russians liars.
This is not to say that his opinions of persons or events
was necessarily wrong. His intuitions were often shrewd.
But he regarded his own views of right and wrong as absolutes,
and was not given to seeing the other side of the story.

He was not a Social Darwinist in any such literal
sense as Brooks Adams, but he did believe in struggle as a
concomitant of life, and in power as the basis of survival.
This stress on power often manifested itself in an almost
farcical love of military or naval show, yet the President
also knew what power was and did not believe in vain boasting
or sabre-rattling. He also felt that power should not be
exerted for its own sake and recognized its corrupting
influence. It should be tempered by limitations of
morality, law and duration.2 His letter to Hay on May 23,
1903, apropos of the Manchurian situation was typical.

"I hate being in a position of seeming to bluster without

 

1Roosevelt was at his most colorful in describing
Durand. ”He seems to have a brain of about eight—guinea—
pig-power,” ”A creature of mutton-suet consistency,” he
wrote. Roosevelt Letters, V, p. 242.

2Introduction to Roosevelt Letters, V, pp. xix-xx;
Beale, pp. 449-54.

130

backing it up," he said.3 Similarly when the Jewish banker
Jacob Schiff asked Roosevelt's intercession on behalf of the
Jews in Russia, he replied that "where we can do nothing I
have a horror of saying anything."4 He continually harped
on the absurdity of the Californians who antagonized the
Japanese with their racist legislation and refused to support
a navy in case of conflict. Another facet of his concept
about power was the belief that America should stand on her
own feet and not trust to alliances. Only in this respect
could America keep the respect of other nations. This, of
course, accorded with the views of the country about entangling
alliances.5

But while Roosevelt believed in power and strength
as necessary to survival, his creed did not lead him to
William Graham Sumner's conclusions about the merits of a
laissez-faire economy. Though Roosevelt had no consistent
philosophic view of man, he did believe that man had moral
qualities that should be recognized. In domestic affairs
government should act to insure justice to all men. In

international affairs the "civilized” nations should police

 

3Roosevelt Letters, III, p. 428.
4Roosevelt Letters, V, p. 112.

5Roosevelt Letters, IV, pp. 1040—43, 1078—80.

131

the world.

There were important qualifications to Roosevelt's
acceptance of Social Darwinism. He did not accept the simple
explanation that only the strongest nations would survive.

Moral and intellectual strength were as important, in his
View, as physical power. Nor did he accept war as a constructive
process by which the weaker nations were eliminated.6

Nor did Roosevelt apply Social Darwinism in a racial
sense. He was careful to point out that there was no such

thing as an Aryan 'race,' only a language; that America and
England were not destined to work together as members of an
Anglo-Saxon race, because, in fact, America was a mixture of
races: that Americans had more affinity to the Japanese
than to the Russians, who were closer racially but who
suffered from a despotic government.

The essential element in world affairs to Roosevelt
was a somewhat nebulous concept of ”civilization.” This
was not precisely defined, but certain moral qualities
appeared to be essential ingredients. Roosevelt was worried

that civilizations would decline, as species did, but this

decline would be as much moral as physical, and he was

 

6Introduction to Roosevelt Letters, V; Beale, p. 272.

7Roosevelt Letters. V, p. 723; IV, pp. 1040, 760.

132

continually feeling the nation's pulse to test its growth
or decadence.8

In his opinion the most civilized nations were, with-
out any doubt. America and Britain, and democratic institutions
were the chief evidence of this quality. He was worried by
signs of Britain's decline, and felt that America must help
her in ruling the backward nations and in policing the world.
Because of this sense of noblesse oblige, he approved
Britain's rule over her empire and American rule in the
Philippines. There was added to this reason for an expansionist
policy a strain of pure patriotism which made him very
sensitive about American prestige and honor abroad.9

Roosevelt greatly admired Japan because of that
nation's readiness to adapt herself to the best in western
civilization. That the process was only beginning in Japan
troubled him less than the dogged adherence of the Russians
to cumbersome and Vbarbaric' institutions. It was partly

for this reason that he was glad to see Japan defeat the

 

8Roosevelt was influenced in these views by Brooks
Adams' book, The Law of Civilization and Decay, with which
he disagreed in detail yet felt was essentially true. His
review of the book is reprinted from Forum of Jan. 1897 in
The Works of Theodore Roosevelt, 24 Vols. Memorial Edition
(New York, 1929), vol. XIV, p. 129 ff.

9Roosevelt Letters, V, pp. 16-17; Beale, pp. 3-22.

133

Russians. The Japanese had been truthful and honest in their
yinternational dealings; they were efficient and hardworking;
they were going ahead industrially; they were strong; they
could rule themselves effectively; on the other hand the
Russians were liars, they had a despotic government, they
were inefficient. These were evidently the qualities that
decided for Roosevelt whether a people were ”civilized” or
"barbarian.” Nor did they necessarily have to conform to
Western civilization in all respects. He admitted there were
qualities the West could learn from Japan, and he did not
seem to be concerned that Japan was not a Christian nation.
He was evidently impressed with the Japanese statesmen he
knew while he remained cool to the Russian Ambassador,
Cassini, and though impressed by Serge Witte, he was shocked
by his immorality.ll

After Japan's victory in the Russian war, Roosevelt
expressed his hope that Japan would take her place among
civilized nations,12 whereby he seemed to imply that Japan

should take responsibility for world peace and stability;

and he expressed the belief that Japan sought peace not only

 

10Roosevelt Letters, IV, pp. 1221-33.

11Roosevelt Letters, V, p. 61.

12Roosevelt Letters, IV, pp. 829, 1233-34.

134

because she was exhausted or had no more to gain from war
but because she wanted peace for its own sake.13

Roosevelt's enthusiasm for Japan reached its height
with her naval victories over Russia, and so great was his
love of a good fight that his enthusiasm temporarily over-
came his caution. There was a good deal more warmth in
his letter of congratulation to Baron Kaneko of May 31, 1905,
than was perhaps seemly from the head of a neutral nation.l4

But on the whole Roosevelt did not lose a sense of
proportion about Japan. As early as 1897 he wrote to Mahan
that we ought to take Hawaii because of the dangers from
Japan.15 In 1905 Japan was still an unknown quantity in
international relations and Roosevelt believed it would be
well for America to be on her guard. He recognized the

danger of Japan's developing a "big head,"16 and saw symptoms

of this in her insistence on an indemnity from Russia and

 

l3Roosevelt Letters, V, pp. 58,61.

l4Roosevelt Letters, IV, p. 1198. In a similar mood
he wrote to Spring Rice, "What a wonderful people the
Japanese are . . . . They are quite as remarkable industrially
as in warfare. In a dozen years the English. Americans and
Germans . . . will have each to dread the Japanese more
than they do any other nations." V, p. 1233.

15Roosevelt Letters, I, May 3, 1897.

16Roosevelt Letters, IV, p. 829.

135

the anti-American riots in Tdkyo after the Treaty of Portsmouth
was announced. As troubles with Japan over the California
immigration question continued to plague America, he con-
tinually stressed the necessity of national preparedness,
and he discovered from the W. L. Madkenzie King, the
Canadian politician, that the Japanese Government too was
not above deceit in granting passports to laborers despite
the Gentleman's Agreement.l7

Despite his reservations about Japan, Roosevelt's
admiration for Japanese strength and efficiency led him to
take a greater interest in America's relations with Japan
than in her relations with China. While theoretically up-
holding the open door and the territorial integrity of China,
he did not have a strong personal interest in things Chinese.
There are no references in his correspondence to Chinese
friends, as there are to Japanese; he often felt irritation
at Chinese inefficiency and weakness; he did not talk
about Chinese Vcivilization' although he was well informed
about Chinese culture by Rockhill and others.18 In fact
Roosevelt barely mentions China in his letters. This

personal bias toward the Japanese may explain why Roosevelt

 

l7Roosevelt Letters, VI, pp. 918—21.

18Beale, pp. 180-81.

136

was slow to recognize their threat to American interests in
Manchuria, even though two of our representatives in Tokyo,
Lloyd Griscom and F. M. Huntington Wilson, were very suspicious
of the Japanese.

While Roosevelt's views on Japan fitted his ideological
view of the world as a system of competing civilizations, they
were tempered by the practical side of his nature. Despite
his ideological concept of the world, Roosevelt did not have
any detailed policy based on this ideology, but reacted to
situations as they arose. As a recent commentator has put
it: 'When in foreign affairs as in domestic the critical
situation arose--as in Cuba, Algeciras, and Korea--there
would be time enough to devise within our scheme of moral
and practical considerations a specific solution to fit the
particular occasion."19 An American pragmatism offset any
tendency to create a make-believe world. Roosevelt's very
belief that America should play a larger role in world
affairs was a recognition of the fact that, as Mahan pointed
out, the world was smaller since the introduction of steam
power. The development of modern industry and communications
was going to force America into a role she had heretofore

escaped. Moreover, Roosevelt derived from BoOks Adams the

 

19Introduction to Roosevelt Letters, V, pp. xviii-xix.

137

idea that the center of power was shifting toward the Pacific,
and that the Pacific would soon take on a new importance.20
It was a similar recognition of facts that made
Roosevelt concerned with Japan. As the victor in 1905,
Japan was a great power in the Pacific. With the Russian
fleet destroyed, she had no naval rival in the Pacific area
other than the United States. In the long term view the
markets of China and possession of the Philippines might be
the basic bone of contention between America and Japan, but
in the immediate present the controversy over Japanese
immigration to the West Coast focused attention on the danger
of Japanese hostility on our very shores. What happened in
China was of secondary importance compared to the apparent
danger on our doorstep. While Roosevelt was probably never
2%
afraid of war with Japan in 1907 a great many other people
were, and he had to deal first with the problem at hand.
Roosevelt always saw the Far East as the area where
civilization and barbarism stood face to face. Japan and
the United States represented the former, Russia the latter;

and the China question was not one of markets but essentially

one of maintaining a balance of power.

 

ZOBeale. pp. 172, 174; Brooks Adams, pp. 72-77.

2J'Beale, p. 326.

138

Roosevelt did not reflect the contemporary concern
about a market for surplus goods. In fact in one letter to
Lodge he seems to discredit the notion that America needed
to export surplus goods. Concerning complaints that American
goods were being sold cheaper abroad than at home, he wrote:

The fact is undoubted. It is of course due to the
further fact that in every business the surplus is
disposed of at below the regular prices. The popular
way of expressing the fact is that the trusts sell
goods lower abroad than at home, because of the way
they are pampered by the tariff; yet the type example
being used, for instance, is the price of a pair of
American shoes in Kansas and in London respectively:
and of course there is no shoe trust. This is a
tariff question pure and simple, and has no relation
whatever to the trusts. Yet I think it has a good
deal of hold on the popular mind.22
Roosevelt's economic views were never very coherent,23 but the
above quotation suggests that to his mind problems of surplus
could be dealt with by tinkering with the tariff.

Hobson and Lenin would probably have dismissed
Roosevelt's arguments as mere camouflage for basic economic
drives. Beard gave both McKinley and Roosevelt (but not
Mahan) credit for sincerity in their ideological and moral

views on world affairs. but felt they were mixed with

material interests. Material interests were involved to be

 

22Roosevelt Letters, III, p. 331.

23Henry F. Pringle, Theodore Roosevelt: A Biography
(New York, 1956), pp. 290-92, 303-05.

139

sure, for no statesman anywhere would remain long in office
who set off on Quixotic adventures. The question is: what
were the material interests involved? Were they economic,
political or strategic?

It would have been highly uncharacteristic for the
outspoken Roosevelt to have indulged in a conscious obscuring
of the issues. Roosevelt himself was neither interested in
personal gain nor was he under the influence of powerful
capitalist entrepreneurs. He was influenced by the intellectual
climate of his times, but as has been pointed out, the ideas
that had the greatest impact on him were not those of an
economic nature. Roosevelt certainly knew and was close to
many of the great financiers and capitalists of his time.
but none ranked among his closest intimates. He often wrote
that money was of no interest to him, and he put greater
value on men who were not money makers.

As for these rich men, I can speak quite disinterestedly.
They are not my friends and never have been. My

tastes unfortunately were wholly alien from.those

which I hope my sons will possess in sufficient quantity
to make them able to do their part in the industrial
world. The money maker pure and simple not merely has
no attraction for me, but is so antipathetic that if

I am to get on with him it is best that we should see
each other as little as possible. The men and women
who have been intimate with me since I have been in

the White House are the same as those who were intimate
with me before I came to the White House. They

include artists and architects. and writers,
philanthropists of the genuine kind, politicians who

140

possess ideals, and hard workers in the business world
who, nevertheless, do take a proper interest in politics
or in philanthropy . . . as well as in business; they
include men I met in the mountains and the backwoods

and on the ranches and plains.24

In short Roosevelt regarded businessmen as individuals. just
as he did labor leaders and Negroes. He refused to classify
people in pat economic categories, and it was always the non-
economic aspect of a man that appealed to him. As a group,
Roosevelt said, ”an oligarchy of colossal capitalism is the
most narrow-minded and meanest in its ideals.”25
In many cases Roosevelt even found business interests

a handicap to the pursuit of the policy he desired. He
wrote Spring Rice:

Both your government and ours must reckon with the

possible clamor the great business interests who

regard everything that will tend to ”unsettle values/'

as they call it, with unaffected horror, as being

worse than any possible future national loss or even

disgrace; and we also have to reckon with a funda—

mentally sound, but often temporarily unstable or

mistaken, public opinion,[as well as the peace—at-

any price mentality.]26
This is in line with Mahan's characterization of the

commercial classes as tending toward pacificism. Mahan had

noted that it was the landed aristocracy who had built

 

24Roosevelt Letters, V, pp. 266—67.
25Roosevelt Letters, IV, p. 1083.

26Roosevelt Letters, IV, p. 1085.

141

England's sea power.

Roosevelt's chief aides in determining policy in the
Far East were Rockhill and Elihu Root, for whose ability
as Secretary of State Roosevelt had great admiration. He
was a better administrator than Hay and dealt more effectively
with Congress. In the Far East Roosevelt laid down the
policy and Root carried it out. but he always had the ear
of the President and frequently changed the tone if not the
meaning of the President's policy. In outlook as in age,
Root was closer to Roosevelt than Hay had been. He shared
Roosevelt's admiration for the Japanese and his irritation
with, though not his contempt, for the Chinese.28 By the
time of the Washington conference, when Japan had clearly
shown her hand in China, Root was still sympathetic to Japan
and felt that the aggressive forces had gained the upper
hand because Japan had been thwarted by the Powers who were
sentimental about China.29 While this may not be an accurate
reflection of his feelings in 1905, it does indicate a bias

toward Japan and a sense of working on the basis of the

 

7Mahan, Influence of Sea Power, pp. 66-68.

28Philip C. Jessup, Elihu Root, 2 Vols. (New York,
1938), II, p. 44.

29Jessup, II, p. 458.

142

power realities of the Far East. Japan was strong, China
was hopelessly weak, and it was futile to go too far in
thwarting Japan; particularly since Root was well aware from
the beginning that the United States would never go to war
to uphold the Open Door in China.30 Since this was the case,
the United States had to remain on friendly terms with Japan
while upholding its own strength.

Those who interpret events from the economic point
of View make much of the fact that Root was a corporation
lawyer, had been counsel for the American China Development
Company, and was in general connected with the interests of
big business before he entered the State Department. This
is another case of making the assumption that a man's thinking
is all of one piece. One could make an equally strong case
that Root's whole approach was legalistic. His biographer
noted that his replies to China on the boycott question read
like a legal brief and that he was criticized for being too
legalistic in his handling of the problem of the Chinese
Eastern Railway at the Washington Conference.3l As a
lawyer he felt it his duty to give the best advice he could

to his client--and in the Northern Securities case it was a

 

3OJessup, II, p. 452.

31Jessup, II, pp. 50, 458.

143

matter of sheer chance which side he did represent, as he

was sought by both. So it was that he advised Morgan to

sell the American China Development Company to China when
Roosevelt was trying to prevent the sale. Despite his
services to big business, he favored Roosevelt's trust busting
activities and he carefully divested himself of all conflicting
interests in business when he entered the War Department.
Government became his chief client, and one he regarded as
superior to private business. He did not believe in active
government support of business enterprises abroad.32 It
would, therefore, be difficult to say that Root was under

the influence of wall Street in foreign affairs.

(As for Roosevelt, his policy in the Far East was
apparently shaped by ideological considerations and certain
personal biases, and was little concerned with economic
factors. Nor was he unduly influenced to act in the interests
of big business and finance.

iRoosevelt's few letters mentioning Far Eastern affairs
before he entered the Presidency indicate that he was in
agreement with Hay's policy of the Open Door, though he

recognized the limitations of America's ability to support

 

32Roosevelt Letters, IV, p. 1278; Jessup, II,
pp. 54—55.

144

such a policy. He wrote Mahan expressing agreement on the
whole with the views put forth in his book, Problems of Asia,
but pointed out that the main problem was that public
opinion was ”dull” on the subject of China, which from a
world standpoint was more important than Alaska or the Canal
about which opinion was more concerned.33 To Speck von
Sternburg he wrote in October, 1901:

I regard the Monroe Doctrine as being equivalent to

the Open Door in South America. That is, I do not

want the Uhited States or any European power to get

territorial possessions in South America but to let

South America gradually develop its own lines, with

an open door to all outside nations, save as the

individual countries enter into individual treaties

with one another . . . . I wish the same policy

could be pursued in China.34
This indicates that the open door was clearly tied to
territorial integrity in his mind.

He evidently relied heavily on Rockhill for his
views on China. In writing to congratulate Rockhill on his
appointment as Commissioner to China in the summer of 1900,
Roosevelt remarked that he had only foggy ideas about China

and asked Rockhill what line he ought to take in the fall

election campaign.35 When Roosevelt became President, he

 

33Roosevelt Letters, III, p. 23.
34
Roosevelt Letters, III, p. 172.

35Roosevelt Letters, II, p. 1359.

145

Sent Rockhill to China as Minister.

For Roosevelt Russia was the real threat in the East
at the turn of the century, although he had earlier been
more favorably disposed toward Russia.36 He wrote to Spring
Rice in 1899:

I understand all that you feel about Russia and of
course Asia is the very place America could least
help you . . . . The steady ethnic growth of
Russia in Asia as opposed to Great Britain's purely
administrative and political growth does make

the Asian problem look serious.37

One of the first problems in Asia facing Roosevelt
as President was the encroachment of Russia in Manchuria
following the Boxer Rebellion. Roosevelt immediately
sounded the note of ”Russian mendacity” which became his
common theme by the time of the Japanese War. By 1903 he
was expressing the wish that America could take a stronger
hand in Manchuria but that American public opinion would not
support such a policy.38 Although there was pressure from
businessmen on the State Department and the American consuls
in China to pry open the door in Manchuria, and Senator Lodge.

sensitive to the cotton interests of Massachusetts, might

have supported stronger measures, Roosevelt was well aware of

 

36Beale, p. 260.
37
Roosevelt Letters, II, pp. 1051-52.

38Roosevelt Letters, III, pp. 478, 532.

146

the lack of interest in the general public.

Roosevelt's real entry into Far Eastern affairs
came with the Russo-Japanese war. America's policy was two-
fold; to uphold the neutrality of China; and to bring the
war to a quidk conclusion before either side was exhausted.

At the outset of war America, at the instigation of
Germany, sent a circular note to the belligerents and the
neutral powers urging that China's neutrality be maintained.
Germany wanted to exclude Manchuria from.the area of China
which was to be preserved, but Rookhill with Roosevelt's
approval, reworded the notes to include Manchuria. Again
in January, 1905, America urged the neutral powers not to
gain concessions from China as the price of making peace
between Japan and Russia. This was in response to German
information that Britain and France had such designs.39

On several occasions during the war America protested
to Russia and Japan on the violation of Chinese neutrality.
The United States also continually impressed on the Chinese
Government the necessity of enforcing neutrality itself.
The United States insisted that if any American property

in China should be damaged by the belligerents it would

 

39Griswold, pp. 93, 102-03; Roosevelt Letters, VI,
p. 1497; IV, p. 731; Varg, p. 58.

147

hold the Chinese government responsible.4O While this might
seem like the move of a grasping imperial power taking
advantage of the weakness of China, it was in line with
American policy during the Boxer Rebellion and later during
the Boycott of insisting that the Chinese government take
responsibility for its internal affairs. This line was

also dictated by the fact that Roosevelt was not prepared

to commit himself in advance to the preservation of China's
neutrality by force. He wrote Hay on August 22 that the
United States should not commit itself one way or another
should Russia's ships violate Chinese neutrality, and again
on August 24 he wrote Adee to tell the navy not to interfere
if Russia and Japan should come to blows in Chinese ports
until it had positive orders to do so. The same day he wrote
to Hay that in this last contingency, the best solution would
be for China to declare her inability to keep peace, and

then let the beDigerents fight it out. In that way Russia
could not use Chinese ports as havens, which she had been
doing. At the same time Roosevelt was apparently prepared
to fight if American ships should be seized by Russia for

41 I I I O
contraband. Thus Roosevelt was anXious to maintain Chinese

40Foreign Relations, 1905, pp. 136-37, 140-41.

41Roosevelt Letters, IV, pp. 901, 903, 904, 869.

148

neutrality short of war, and he was prepared to fight only
if specific American interests were at stake. He was not
going to commit the country to a policy which he could not
enforce.

Roosevelt's role in bringing Japan and Russia together,
and in the negotiations leading to the Treaty of Portsmouth
is well known. What were Roosevelt's aims in these negotiations
and what did the Treaty mean for American policy?

Roosevelt was undoubtedly genuinely anxious to make
peace for its own sake, and to enhance American prestige
by being the mediating force. There was probably also an
element of personal vanity. He wrote to Root on September
14:

For the last six months most of what I have done

in connection with foreign affairs, including the

eastern war, Santa Domingo, Morocco, even venezuela,

not to speak of the Hague conference--has been on

an exclusively altruistic basis and I do not want

people to get the idea that I never consider

American interests at all, or still worse that I

am posing as never considering them.42

“Roosevelt considered peace very much in the American

interest before Japan Should permanently crush Russia in the

East. He had in fact already several times urged Russia to

make peace. ”While for the rest of us, while Russia's

 

42Roosevelt Letters, V, p. 26.

149

triumph would have been a blow to civilization, her
destruction as an easte Asiatic power would also in my
opinion be unfortunate.rfiLt is best that she be left fact
to face with Japan so each may have a moderating action on
the other.”43 So long as Japan remained interested in
Korea, Manchuria and China, Russia would be her natural
enemy, Roosevelt wrote Spring Rice. If Japan should shift
her interests to other parts of the Pacific, she could be
checked by sea power, whereas Russia was not vulnerable to
sea power.44 With Roosevelt it was always axiomatic that
America should maintain her sea power. ”While Russia and
Japan would check each other in the Far East, he did not
think the United States should trust either to an alliance
or to the power position of other countries to safeguard
her interests, but that she whould rely on her own
efforts.45 These comments indicate that Roosevelt was
thinking of the power position in the East in terms of
protecting American interests in the Pacific rather than as

a guarantee of China. >China would have been glad to see

Russia and Japan wear each other out, as he was aware.

 

43Roosevelt Letters, IV, p. 1230.
44
Roosevelt Letters, IV, p. 1087.

45Roosevelt Letters, IV, pp. 1087, 1234.

150

England, too, he suspected, would like to see the war go on,
and with this in View had urged the Japanese to demand an
indemnity. Roosevelt tried to urge upon Britain the view
that her interests would best be served if Russia were left
with a position in Asia, for then she would have something to
lose in future conflict, whereas if Russia were driven out of
Asia, all possible damage would be done in that quarter and
Russia would turn toward India or the Middle East, the areas
in which Britain was most concerned.

‘It is apparent that Roosevelt did not consider Japan
a threat to the United States in 1905. 1A year later, however,
he stressed the importance of Russia as a cheek on Japan,
and considered Russia no longer a threat in view of her
internal troubles. Russia was also useful in drawing
Japan's racial hostilities away fromAmerica.47

One of the results of the Russo-Japanese war was
the establishment of Japan's protectorate over Korea, which
America recognized in the Taft-Katsura agreement of July,
1905. This agreement has been represented by many writers

as a sellout of China and an appeasement of Japanese imperialism

to protect America's empire in the Philippines. The fact

 

46Roosevelt Letters, IV, pp. 1150, 1265-66.

47Roosevelt Letters, V, pp. 473-75.

151

that the Taft-Katsura talks were kept secret until 1924
added to the belief in a sinister meaning. This interpretation
ignores several important points about the agreement.

Although Japanese absorption of Korea was certainly
an aggressive act, it cannot be regarded as an attack on the
territorial integrity of China because by 1905 Korea had
been recognized as an independent nation. Nor can this
supposedly callous imperialist bargain have been brought
about by pressures from economic interests because Roosevelt
acted in the face of strong protests from.American business-
men in Korea,48 and there is no evidence that rival business
interests in the Philippines sought protection from Japanese
attack.

Roosevelt acted because he saw no hope of preventing
Japanese aggrandizement in Korea which not even the Koreans
xmere prepared to resist. It was a case of accepting the
facts of power politics. Japan's special interest in Korea
had already been recognized in the first Anglo-Japanese
alliance, and was again in the renewed alliance, and it was
also recognized in the Treaty of Portsmouth. Should America
have wanted to oust the Japanese by force from Korea she

'would have had no help from Britain and might seriously have

 

48Beale. p. 316.

152

endangered her relations with that nation. American
interests were not sufficiently great, Roosevelt felt, to
risk conflict with Japan.

“Apart from the limitations on action forced upon
him by the Anglo-Japanese alliance and Japan's military
position, however, Roosevelt actually seemed to feel that
Korea was part of Japan's legitimate spoils of war.
Remembering the troubles attendant upon depriving her of her
spoils of war, in 1895, he felt America should see she was
not robbed again.49 'he evidently long regarded Korea as a
legitimate Japanese sphere, for at the time of the Boxer
revolt he wrote that Japan'deserved” Korea for her role in
rescuing the legations and checking the Russians. At that
time, however, he feared that the Japanese acquisition of
Korea would probably start another slicing of China which
would be bad for everyone. Roosevelt probably also shared
Root's belief that Japanese rule of Korea would be better
than that of the opera bouffe Korean government.50

Although the Taft-Katsura talks were a recognition

of a fait accompli and accorded with the recognition of

 

49Roosevelt Letters, IV, p. 865.

50Roosevelt Letters, II, p. 1394; Jessup, II, p. 7.

153

Japan's position in the Treaty of Portsmouth which Roosevelt
approved, the talks could not have been part of a deliberate
plan because they were first sought by the Japanese and
because Taft had no specific instructions from Roosevelt.51
There is also strong indication that the recognition of
Japan's position in Korea was not granted in exchange for
Japanese assurances concerning the Philippines and that the
two sections of the agreement were not dependent upon each
other.
\Roosevelt did not believe Japan harboured any

aggressive designs on China but genuinely believed in the
open door.52'3His attitude of admiration for Japan, condescension
for China and acceptance of facts in regard to Korea are
revealed in a letter to Spring Rice long before anyone
realized Japan would deliver a knockout blow to Russia and
become a major Pacific power. He had lunched with the
Japanese Minister and his friend Baron Kaneka, and told them
he hoped Japan would not get a ”big head” by its victories.

Of course they earnestly assure me that all talk of

Japan's even thinking of the Philippines was nonsense.

I told them that I was quite sure this was true . . . .

I then said that as far as I was concerned I hoped to

see China kept together and would gladly welcome any
part played by Japan which would tend to bring

 

51Jessup, II, p. 5.

52Roosevelt Letters, IV, p. 1231.

 

154

China forward along the road which Japan trod,
because I thought it for the interest of all the
world that each part of the world should be
prosperous and well policed; I added that unless
everybody was mistaken in the Chinese character I
thought they would have their hands full mastering
it--at which they grinned and said that they were
quite aware of the difficulty they were going to
havesgven in Korea and were satisfied with that
job.

The separation of the Philippine and Korean question
is seen in the above quotation. It is more explicit in
Roosevelt's letter to Taft accepting Taft's agreement with
Katsura.

The statement about the Philippines was merely

to clear up Japan's attitude, which had been
purposely misrepresented by pro-Russian
sympathizers and is shown [in Taft's memorandum]
to have been entirely apart from your statements--
that is our statements--in reference to Korea

and in reference to our having the same interests
with Japan and Great Britain in preserving the
peace of the Orient.54

(

(Roosevelt had some concrete reasons for his belief that
Japan was no threat to the Philippines. In the first place
Japan would be fully occupied with her prior interests on
the mainland, and in the second place any attack on the

Philippines would seriously strain her relations with

England and bring on a coalition against her of the Uhited

 

53Roosevelt Letters, IV, pp. 829-30.

54Roosevelt Letters, V, p. 49.

155

States, Germany, France and Russia.55

The Taft—Katsura agreement has also been represented
as a tacit joining of the Anglo-Japanese alliance. This
is of course an exaggeration because the United States was
never committed to act. Roosevelt approved of the Alliance
and in some statements indicated that he would like to join,
but in others he remarked on the weakness of England, and his
own proclivities were against trusting to an alliance. He
never seemed to realize the extent to which the British
support of Japan worked against the interests of the Open
Door in China, although he did complain that the British had
refused to use their influence to get Japan to modify her
demands at Portsmouth.56

The Root—Takahira agreement of 1908 is cited as
further confirmation of the policy begun in 1905 to give
Japan a free hand in Northern China in exchange for the
security of the Philippines. There are ambiguities in the
wording of the agreement that lend themselves to such an
interpretation, but there is no contemporary evidence that

Root or Roosevelt intended to appease Japan. The most

 

55Roosevelt Letters, V, p. 135. Again, however,

Roosevelt added his axiomatic belief that America should
keep her navy strong and should fortify the Sandwich Islands.

56Beale, pp. 171, 299, 305; Griswold, pp. 114-15.

156

ambiguous clause provided for the "maintenance of the existing
status quo" in the Pacific region. However, this might be
interpreted as a reference to the west Coast and Hawaii as
well as to the Philippines. Other significant clauses
promised to "respect the territorial possessions belonging

to each other in said region,’ and reaffirmed their support
"by all pacific means at their disposal the independence

and integrity of China and the principle of equal opportunity
for commerce and industry of all nations in that Empire."
This last provision was a variation of the usual phrase
calling for the preservation of "the territorial integrity

and administrative entity of China,' and commentators have
disagreed on whether it was a significant change. The
omission of ”territorial” was not at the suggestion of the
Japanese, however, and there is no indication that Root
intended a different meaning.

Because of the ambiguities of the language, the
agreement cannot be properly understood except in the context

of other events. Looked at in this way it fits into place

as part of a policy that aimed at a careful balance of

 

57Williams, Diplomacy, p. 491; Jessup, pp. 36-37;
Griswold, p. 129. Raymond A. Esthus, ”The Chancing Concept
of the Open Door, 1899-1910,” Mississippi Valley Historical
Review, Vol. 46 (Dec., 1959), pp. 445-49.

 

157

attitudes toward Japan. At a time when relations with Japan
were tense, the United States sought to allay Japanese
suspicions and antagonisms toward America while firmly
upholding vital American interests. The Philippines were
but one of these interests. The ambiguities were thus
in part designed to blur the disagreements that did exist.
lFrom the close of the Russo-Japanese war, American
relations with Japan had deteriorated rapidly largely as a
result of the immigration problem on the west Coast. This
controversy reached war scare proportions by 1907, and
while Roosevelt and Root apparently did not share the
general alarm and Taft reported from Japan, which he visited
in September 1907. that he did not believe the Japanese
wanted war,?8 the situation was sufficiently inflammable to
warrant preparedness. This preparedness included military
measures not only in the Philippines but in Hawaii and on
the United States' West Coast. Root, who did not expect
immediate hostilities, feared a gradual drift to war.59

Roosevelt's attitude was consistent throughout. On

one hand he urged the Californians to avoid irritating the

 

58Roosevelt Letters, V, pp. 527-29; VI, p. 946;
Beale, p. 326; Jessup, II, pp. 26-27.

 

59Roosevelt Letters, V, pp. 730, 738, passim;
VI, pp. 950—52, 937, passim; Jessup, II, pp. 25-26.

 

158

Japanese, and on the other hand, he, as always, urged the
building of ships to deter a Japanese attack. Root followed
the same policy toward California, While trying to reach an
agreement with Japan on the immigration question.60
Similarly toward Japan the approach was twofold{ Roosevelt
was anxious to show friendliness on minor issues, such as
participating in a proposed international exposition in
Tokyo,61 but at the same time he made it clear that America
would remain firm on the immigration question. The fleet
was sent on a world cruise with this as one of the purposes.
The war scare subsided after the Gentleman's
Agreement concerning Japanese immigration was reached at
in the winter of 1907—08, but relations remained tense and
it remained to be seen whether the Agreement would work.
The first suggestion for a declaration of friendly
intentions in the Pacific by the United States and Japan
came from the Japanese Ambassador Aoki in October, 1907,
but the idea was dropped at that time by the Japanese Foreign
Office. With the friendlier atmosphere of 1908 and the change

of government in Japan in July, the new Japanese Ambassador

in Washington revived the idea. The Americans were anxious

 

60Roosevelt Letters, V, pp. 90-91; passim; Jessup,

II. pp. 7-30.

61
Roosevelt Letters, VI, p. 964.

 

159

to foster the improved relations that had come about.62

That Root did not intend to give Japan a free hand
in Manchuria is supported by the fact that during the year
1908 he had been protesting to the Russian Government con-
cerning their encroaChments on the municipal government at
Harbin on the legal basis of their railroad agreement with
China of 1896. The United States did not want the Japanese
to have such a precedent for using their railway rights in
Southern Manchuria to extend administrative control there.63
It seems likely that Root was not fully alive to Japanese
intentions on Manchuria despite Willard Straight's warnings,
but believed they still followed the open door policy. The
whole concept of the Gentleman's Agreement indicated an
underlying faith in the good intentions of the Japanese
government.64

Although the British welcomed the Root-Takahira
agreement which lessened the tensions between their ally and
their close friend, the British Ambassador Lord Bryce pointed

out the unusual procedure of an outgoing administration

reaching an agreement that could have no binding effect on

 

62Jessup, II, pp. 34—36.

63Foreign Relations, 1910, pp. 202-08. Esthus,
pp. 445-49; Jessup, II, pp. 52-53.

64
Jessup, II, pp. 7, 29, 34, 37, 40—41, 44.

160

a new administration. The agreement was not a formal treaty.65
However well intentioned Root was, the ineptitude
of his agreement had disastrous effects in China. The
Japanese were able to represent the agreement to the Chinese
as a Japanese-American rapprochement, and engineer the fall
in January, 1909, of Yuan Shih Kai, who was strongly anti-
Japanese. Root tried to rectify this move by protesting in
vain against Yuan's dismissal.66
Yuan's fall was also due to the failure of Tang
Shao Yi's mission to Washington to seek development funds
for China. Although Root was sympathetic with the aims of
this mission and permitted Tang's supporter, Willard Straight
to introduce Tang to financial interests, he did not want
to involve the State Department in financial dealings with
China.67 This policy was advocated by Straight, who was
at that time acting head of Far Eastern affairs in the
State Department, and other members of the Department, and
was adopted by the Taft administration.

The Roosevelt administration was thus anxious to

build up Chinese resistance to the Japanese by supporting

 

65John Gilbert Reid, The Manchu Abdication and the
Powers, 1908-1912 (Berkeley, 1935). PP. 18-22.

66Varg, p. 80.

67Charles vevier, The United States and China 1906-1913:
A Study of Finance and Diplomacy (New Brunswick, 1955). p. 78;
Jessup, II, pp. 53-55.

161

YUan and encouraging investment, but it was not ready to
involve the American government and American prestige directly
in this effort. Relations with Japan were at such a dangerous
point that in the view of the administration the support of
China was a secondary consideration. This was indicated by
the rejection of an alternative line of policy suggested by
the German government. Late in 1907 the Germans suggested
a new declaration of the open door in which China would
participate. Yuan hoped to achieve such a declaration, but
the Chinese were sufficiently dilatory to arouse Roosevelt's
irritation, and in the end he rejected the proposal.
Roosevelt told the German ambassador that he did not want
to encourage excessive boldness in the Chinese for fear they
would expect greater support from America and Germany than
they would be prepared to give. The American people would
accept a war with Japan over China only if vital American
interests were at stake.68 Such vital interests were at
stake in the immigration question, and to avoid war Japan
had to be mollified. The Root-Takahira agreement was the
rather inept method chosen.

(

'Throughout his term in office Roosevelt's Far

Eastern policy hinged on relations with Japan rather than

 

68Reid, p. 22; Vevier, pp. 69, 74; Varg, p. 78.

162

with China, partly because events forced Japanese questions
2
to the fore. 1At the beginning of his term of office Japan
was a relatively weak power, but one the President admired
for its adjustment to western influence and later for its
fighting skill. He believed that Japan deserved a place
in the sun and should not be thwarted in its legitimate
claims. He did not believe these claims were incompatible
with the territorial and administrative integrity of China.
At the end of the Russo-Japanese war he sought to maintain
the balance of these two powers in the East, and welcomed
the Anglo-Japanese alliances as a stabilizing force.

JAfter the war Japan became a power in the Pacific
and Roosevelt's policy shifted accordingly. As tempers rose
over the immigration question, his attitude toward Japan
stiffened, yet he tried to maintain a balance in order not
to antagonize Japan. Both the Taft-Katsura agreement and
the Root-Takahira agreement have to be interpreted in the
context of the administration's total policy. This policy
aimed at firmness where vital issues were concerned, and
understanding on peripheral issues. It included the
Gentleman's Agreement, the pressures on those in California

responsible for anti-Japanese actions, naval preparations,

the cruise of the fleet, the protests on Harbin.

163

During these later years of his term Roosevelt
regarded the immigration problem as the central issue, not
the Philippines, although on occasion he registered his
concern about their security.69 Toward the end of his term
he could speak of the Philippines as an Achilles heel. Our
rule had benefited the islands, he believed, but he would
have liked to see their independence as this would have
removed temptation from the Japanese.70

That the Japanese problem worried Roosevelt was
indicated by a letter he wrote the incoming Secretary of
State in February, 1909.

. . . There is one matter of foreign policy of such
great and permanent importance that I wish to lay
it before the President-to-be and yourself. I
speak of the relations of the United States and
Japan . . . .

But with Japan the case is different [from
other potential problems]. She is a most
formidable military power. Her people have peculiar
fighting capacity. They are very proud. very
warlike, very sensitive, and are influenced by
two contradictory feelings. namely, a great self-
confidence, both ferocious and conceited, due to
their victory over the mighty empire of Russia;
and a great touchiness because they would like
to be considered as on a full equality with, as
one of the brotherhood of, Occidental nations,
and have been bitterly humiliated to find that
even their alfies, the English, and their friends,
the Americans, won't admit them to association

 

69Roosevelt Letters, V, p. 473.

70Roosevelt Letters, V, pp. 776, 762.

164

and citizenship, as they admit the least advanced

or most decadant European peoples. Moreover,
Japan's population is increasing rapidly and demands
an outlet, and the Japanese laborers, small farmers,
and petty traders would, if permitted, flock by the
hundred thousand into the United States, Canada

and Australia.

America could not permit such large scale immigration,
Roosevelt continued, but in preventing this it was necessary
to act with "all possible courtesy and consideration,”
and to be "thoroughly armed, so as to prevent the Japanese
from feeling safe in attacking us.”

He went on,

Moreover, Japan is vitally interested in China and
on the Asiatic mainland and her wiser statesmen will
if possible prevent her getting entangled in a war
with us, because whatever its result it would hamper
and possibly ruin Japan when she came to deal again
with affairs in China. But with so proud and
sensitive a people neither lack of money nor possible
future complications will prevent a war if once they
get sufficiently hurt and angry; and there is always
danger of a mob outbreak there just as there is
danger of a mob outbreak here.71

'iThe implication of this letter is that Japan should
be given a free hand in Northern China in exchange for
restricting her immigration to the United States, rather
than for respecting American rule in the Philippines.

However, Roosevelt probably did not intend to countenance

 

71Roosevelt Letters, VI, pp. 1510-14.

165

such flagrant abuses of Chinese sovereignty as did in fact
take place. but hoped by the right policy to encourage the
"wiser statesmen.” This idea is suggested in a letter to
an English friend in which he says, "Indeed the agreement
[of England] with Japan is an admirable thing all around.
As you say it is a knockout for the mischief makers on
both sides of the Atlantic--and I may add on both sides of
the Pacific.”72

On all occasions Roosevelt tried to avoid committing
the United States to a policy that the country would be
unable to or unwilling to enforce. His dislike of ”blustering"
was registered at the time of the Manchurian crisis in 1903.
He still clung to the same theme in 1910 when a letter to
Taft expressed his views on the policy of his successors.
Although the statement may benefit by the clarity of hindsight,
it is a fair summary of Roosevelt's outlook on Manchuria and

Far Eastern affairs in general.

. . . It is therefore peculiarly our interest not
to take steps as regards Manchuria which will give

 

72Roosevelt Letters, VI, p. 1432. Beale argued that
the sending of the fleet on the world cruise had the effect
of helping the militarists to power in Japan, and that
Roosevelt was totally unaware of the effect of American
policy on internal Japanese affairs (p. 331). These letters
suggest Roosevelt was not insensitive to Japanese feelings,
although he perhaps misjudged the effect of his actions.

 

166

the Japanese cause to feel, with or without reason,
that we are hostile to them, or a menace--in however
slight a degree-—to their interests . . . I utterly
disbelieve in the policy of bluff, in national and
international no less than in private affairs, or

in any violation of the old frontier maxim, "Never
draw unless you mean to shoot." I do not believe

in our taking any position anywhere unless we can
make good; and as regards Manchuria, if the

Japanese choose to follow a course of conduct to
which we are adverse, we cannot stop it unless we
are prepared to go to war, and a successful war
about Manchuria would require a fleet as good as that
of England, plus an army as good as that of Germany.
The Open Door policy in China was an excellent thing,
and I hope it will be a good thing in the future,

so far as it can be maintained by general diplomatic
agreement; but as has been proved by the whole
history of Manchuria, alike under Russia and under
Japan, the ”Open Door” policy, as a matter of fact,
completely disappears as soon as a powerful nation
determines to disregard it, and is willing to run
the risk of war rather than forego its intention.73

Here the expansionist of 1898 is stating firmly that
there is limit to America's interests and ability to control

events in other parts of the world.

 

73Quoted in Reid, p. 182.

CHAPTER VI

TAFT, THE BANKERS AND CHINA

At first glance William Howard Taft's Far Eastern
policy appears to substantiate J. A. Hobson's interpretation
of imperialism. Indeed a number of historians have so inter-
preted it. These writers point an accusing finger at Taft's
own use of the term ”dollar diplomacy,” they cite the pressure
exerted to open the door to American capital in Manchuria,
and they portray Willard Straight as the agent of interests
who wished to make the government the handmaiden of finance
capital. An examination of the facts suggests that this
explanation is at best much too simple and at its worst
borders on distortion.

Taft and his Secretary of State, Philander C. Knox,
took office at a time when the traditional open door policy
with its emphasis on equality of commercial opportunity was
becoming ineffective. The larger aim of that policy was
a strong China and its concomitant, a balance of power in
the Far East. By March, 1909, it was clear for all to see
that China's integrity and independence was being compromised
by Japan's aggressive use of her South Manchurian railroad

to dominate the provinces north of Peking. And in the

167

168

northern half of Manchuria, Russia through her ownership

of the Chinese Eastern Railway, was exercising sovereign
powers that violated the territorial and administrative
integrity of China. A new network of railroads in China
proper to be financed by foreign powers suggested that in
the future nations with a predominance of capital investment
would dominate Chinese affairs and the influence of the
United States would be destroyed. The dangers inherent

in this foreign domination were increased by the fact that
the Chinese government was going through a period of instability
following the death of the Emperor and Empress Dowager in
December, 1908.‘ Taft and Knox responded to the changing
situation in China with a determination to revitalize
America's traditional policy of preserving the territorial
and administrative integrity of that country.

The Taft administration soon sought to achieve its
goals by applying the open door concept to investment as
well as to commerce. There was a particular effort to
introduce American capital into Manchuria through the
Chinchow—Aigun railway plan, the Knox Neutralization
Proposal and the Currency Reform Loan, but the principle
was also applied to China proper in the effort to join the
Hukuang loan. The new strategy was in part a natural

response to what was taking place in Manchuria, but it

169

also had its origins in Edward Harriman's efforts to
implement his dream of a globe—encircling transportation
system.

The American railway magnate took his first step to
achieve this grandiose scheme on a trip to Japan in 1905
when he hoped to buy a share in the Southern Manchurian
railway which Japan had just acquired from Russia by the
Treaty of Portsmouth, an acquisition later confirmed by a
secret agreement with China in December, 1905. Harriman
was able to approach the Japanese through his connection
with the bankers, Kuhn,Loeb and Company, who had lent money
to Japan during the war, and through Lloyd C. Griscom, the
American ambassador to Tokyo. Griscom favored supporting
American business and acted on Harriman's behalf without
prior consultation with Roosevelt, who had just brdken with
Harriman over the Northern Securities case. Harriman
actually reached an agreement with the Japanese, but it was
soon repudiated when Baron Komura returned from Portsmouth.l

While he was in the Far East, Harriman met Willard
Straight, a young American who had just become vice-consul

in Seoul. Straight developed a passionate hatred for the

 

1Lloyd C. Griscom, Diplomatically Speaking (Boston,
1940). pp. 263-64.

170

Japanese while watching them take over Korea. He became
interested in Harriman's railway plan as a means to
prevent further Japanese encroachment on the mainland of
Asia. Harriman in turn saw a useful agent in Straight who
was intelligent and well informed on Far Eastern affairs.

A year after he met Harriman, Straight took up
residence in Mukden as America's first Consul General. Here
he devoted his efforts to promoting American business to
offset the predominant influence of Japan.2 Throughout
1906 the Japanese, pleading military necessity, had hindered
the entrance into Manchuria of foreign businessmen while
allowing free entry to their own. At the same time that
they were completing arrangements for their own government's
control of the Southern Manchurian Railway, they were
hindering the establishment of international settlements
and the organization of the Chinese Customs in the Manchurian
treaty ports.3 In June, 1906, three Shanghai businessmen,
anxious to investigate the bottleneck for goods transshipped

from Shanghai into Manchuria, reported that Japan seemed

to be favoring her own merchants, although they could offer

 

2Croly, pp. 207—12, 235.

3Foreign Relations, 1906, pp. 170-72, 177-82, 195,
198—99, 202 passim.

171

no definite proof.

Straight came to the conclusion that American trade
simply could not be great enough under existing conditions
to offset the Japanese, who could add military and political
pressure to trading advantages. What was needed was more
capital investment to increase the potential market for
American goods.5 With Harriman's project in mind, Straight
began to work with the Chinese in Manchuria to find a railway
route that would offset the influence of the Southern
Manchurian route but at the same time offer no valid excuse
for Japanese objections.6 The plan then expanded into one
for a loan to establish a Manchurian bank that would under-
take the general development of the region. The plan for
a railroad was sent to Harriman on August 7, 1907, but it

arrived at a moment when the Panic of 1907 was in full swing

 

4Foreign Relations, 1906, p. 210; Consular Reports,
Shanghai, Vol. 53, No. 170. The movement of American goods
to Manchuria was considerably complicated at this time by
the Chinese boycott, which affected Shanghai, the port from
which goods were shipped into Manchuria.

5Croly, pp. 237-38; Vevier, p. 45.

The precise route of the railroad changed during
the course of negotiations, but the essential idea to parallel
the South Manchurian remained the same. The first plan
called for a road from Hsinmintun to Tsitsihar on the
Chinese Eastern Railway. The final route ran from Chinchow
to Aigun on the Russian border.

172

and Harriman could not raise the necessary funds.7

After this setback, Straight worked to convert the
American government to his policy of introducing American
capital into Manchuria, and he eventually succeeded. Thus
any interpretation of American policy rests very largely on
one's interpretation of the relationship between Straight
and Harriman. Charles vevier thought Straight was merely
an agent for Harriman, and he concluded that the China
policy of the American government was really just a cover
for Harriman's railway schemes.8 It seems more likely,
however, that Straight saw in Harriman's plans a means to
further his own efforts to prevent Japanese encroachment.
This interpretation of Straight's motives is more in
accord with the personality of Straight as portrayed by
his friend and biographer, Herbert Croly.9 Far from being
the typical agent of economic imperialism, Straight was a
.complex mixture of idealist and selfseeker, artist and
adventurer. Like his colleague Rockhill, he was a devoted
student of Chinese civilization, and at the same time he

‘was a strong American patriot. His detractors usually fail

 

7Croly, pp. 240-42; Vevier, pp. 46—47.
8Vevier, pp. 215-17.
9This view is also taken by Straight's associate,

F. M. Huntington Wilson, Memoirs of an Ex—diplomat (Boston
1945). p. 167.

173

to mention that he was the founder of one of America's most
liberal journals, The New Republic. While he was an official
of the Chinese Imperial Customs, he revealed his ambitions
in his diary:

But the Service will never be my life nor the success

in the Service my aim. It will rather be to draw

the Chinaman as he is or to write of him or to know

him so well that some day I can put my finger in the

”international pie."lo
Straight saw a role for himself as a pioneer, not in opening
new territory in China, but in opening China to new commercial
ventures. He was moved by a mixture of adventure, ambition
and philanthropy.

That Straight was not purely Harriman's tool is
indicated by the fact that it was he who continually took
the initiative for economic schemes in the Far East. He
first made arrangements with Manchurian officials for a
railway to parallel the Japanese-controlled Southern
Manchurian line, then sent the plan to Harriman. After
Harriman's death he continued to carry on negotiations for
this plan independently. In 1909 he refused to go to China

as the agent for Kuhn, Loeb and Company, Harriman's bankers,

but did go as the representative of the American Group of

 

10Quoted in Croly. p. 116. See also p. 117.

174

bankers, which was the agent of the State Department. This
suggests that it was a larger outlook, not just Harriman's
railway venture, that interested him. Not long after the
China venture ended, he resigned his post with J. P. Morgan
and Company because business as such did not interest him,
although he kept connections with other organizations
involved in foreign trade.11

Critics of Straight overlook the fact that a policy
similar to his was advocated by a large number of Chinese
concerned with Manchurian affairs. In 1906 the governor of
Heilungchiang, one of the Manchurian provinces, sent a
memorial to the Imperial government advocating a Chinese-
financed railway from Hsinmintun to Potuna, and in the
following year there were suggestions for other railways in
Manchuria. The Ministry of Communications in Peking recom-
mended to the Grand Council the building of a Hsinmintun-
Tsitsihar extension of the Peking-Mukden railway. In
June of 1907 the Chinese administration of Manchuria was

reorganized on a civilian basis to strengthen the local

government against Japan and Russia. The new civilian

governor general, Hsu Shih-Chang and the governor of Fengtien

 

llCroly, pp. 459-61.

175

province, Tang Shai-yi, saw that foreign capital would be
needed for any railways in Manchuria. On the basis of
Chinese documents, Robert L. Iridk states that it was the
Chinese who first approached Straight with the suggestion
of building a Hsinmintun-Tsitsihar line.12 Tang and Straight
made the agreement that was forwarded to Harriman in 1907.
Throughout the ensuing negotiations the officials in Manchuria
continually pressed the Peking government to make an agreement
with the Americans, but the more conservative elements in
Peking were less sure that America would honor its option
in the face of Russian and Japanese objections, and many
Chinese objected to foreign loans in general.13

Furthermore. Straight's critics do not explain why,
if he were merely Harriman's agent, he supported the move
to introduce French and British capital into Manchuria when
Harriman was unable to supply the necessary funds. In
November, 1907, Tang came to an agreement with the English
railway financiers, Lord ffrench of Pauling and Company and
J. O. P. Bland of the British and Chinese Corporation.

Both Lord ffrench and Bland had hoped to swing British

 

12Robert L. Irick, ”The ChinchOWhAigun Railroad and

the Knox Neutralization Plan in Ch'ing Diplomacy,” Papers on
China, from the East Asia Regional Studies Program, Harvard
University, Vol. 13 (Dec., 1959), pp. 83-84.

13Irick, pp. 105-06, passim.

176

policy away from support of Japan to support of her own
commercial interests in Manchuria, and in this endeavor their
interests were similar to Straight's. Their calculations
failed. Japan opposed the concession on the basis of her
secret agreement with China of December, 1905, that no
railroad parallel to the Southern Manchurian would be built;
and the British government refused to back Pauling and
Company against their ally.l4

Although Straight was not successful in 1907 in
introducing American capital into Manchuria, he had already
begun work to gain support for his policy. After he had
written Harriman, he informed the Assistant Secretary of
State of his plan, but without mentioning his letter to
Harriman. In November, 1907, he met Taft in Manchuria and
discussed Far Eastern problems with him. In July Straight
was called home, at Harriman's instigation, to negotiate
further on the railway plan. The panic was receding and
Straight hoped that Harriman would now finance the agreement
he had reached with Tang if the American government

15

supported him.

Tang himself also came to Washington, ostensibly to

 

l4Croly, pp. 243-48; vevier, pp. 51-57.

15Croly, pp. 249-51, 266; Vevier, pp. 49, 59-62, 72.

177

thank the United States for its return of the Boxer indemnity,
but in reality to discuss two plans. One was a variation
of his own plan which called for the use of the funds remitted
from the Boxer indemnity to establish a bank for the development
of Manchuria. Straight approved this idea, but it was
opposed by Rookhill and William Phillips, who wanted to use
the Boxer funds for the education of Chinese in America,
and who distrusted Chinese financial methods. Roosevelt
too opposed the use of these funds for the Manchurian scheme
because he did not want to antagonize the Japanese in Manchuria
and felt that "we were in no position to have our bluff
called.”l6 Moreover Tang arrived in Washington just as
the Root-Takahira agreement was being signed. Straight did
manage to get the State Department's approval, in Root's
absence, to negotiate with Harriman for a Manchurian bank
loan.

Tang's other proposal--a loan for financial reforms
in China proper which would presumably include capital from
other powers--met with greater sympathy from the administration.
for it was in accord with the policy America had followed
since the Boxer protocol and the Treaty of 1903. Straight

received Root's personal approval to introduce Tang into

 

16Quoted in Vevier, p. 75.

178

commercial circles for this purpose, with the warning that
"the State Department had no wish or authority to involve
the United States in any obligation either legal or moral
with reference to such a loan."17 Straight was authorized
to publish this View to anyone who was interested in the
loan. Despite this disclaimer of government involvement,
Harriman continued negotiations. The government's specific
refusal to be associated in such a loan was in accord with
the Roosevelt policy not to antagonize Japan, yet both Root
and Roosevelt approved of financial reform in China. This
proposal of Tang's was the basis for America's later
involvement in the Currency Reform Loan.

Straight brought both plans directly to Harriman.
but the negotiations came to nothing. The death of the
Empress Dowager and the Emperor put Tang's credentials in
doubt, and the fall from power of Yuan Shih Kai, largely
as a result of the Root-Takahira agreement, undermined
Tang's political position. It should be noted that to the
end of the Roosevelt regime the only railroad plan under
discussion between China and America was the private negotiation

of Harriman and Straight for the Chinchow-Aigun.18

 

17Quoted in Vevier, p. 78.

18Croly, p. 281.

179

Since he had arrived in Washington, Straight had
been active in converting members of the State Department
to his view, that American capital alone could prevent the
further disintegration of China, and by the time the Taft
administration took over his outlook was in the ascendant.
Taft and Knox were in favor of a more active policy in
China and a more active government role to support business.
There was also a strong anti—Japanese bias. F. M. Huntington
Wilson, who had become distrustful of the Japanese during
his years in TOkyo, was Assistant Secretary of State.19
Rockhill, who had been more sanguine about Japan, was
transferred from Peking to St. Petersburg.

The first manifestation of the change in the attitude
of the American government was the American effort to enter
the Hukuang loan, and the formation in June, 1909, of the
American Group of bankers. The new administration also was
soon involved in Straight's plans in Manchuria. Straight
resigned from the State Department to become the representative
of the American Group in negotiations in London with the
European bankers and later in Peking with the Chinese and

foreign bankers for the Hukuang loan. He continued to lead

 

19Huntington Wilson, pp. 70-72, 86, 127, 145-50,
passim.

180

a double life, with the Chinchow-Aigun plan as his secret
mission. Harriman, who was one of the members of the American
Group, asked Straight to continue negotiations with the
Manchurian officials and also with the Russians for the
sale of the Chinese Eastern railway.

The Manchurian plan had received a new impetus in
the winter of 1908 when a French banker, representing Russian
interests, offered to sell the Chinese Eastern Railway to
Jacob Schiff of Kuhn, Loeb. Schiff had rejected the plan
because of his anti-Russian sentiments, but Harriman hoped
to revive the connection. With the ChinchowaAigun concession,
the Chinese Eastern, and trackage rights on the Trans-Siberian,
the round-the world line envisaged by Harriman would be in
sight. Straight calculated that with the Chinchow~Aigun
concession and the Russian connections the Japanese would
be forced either to sell the South Manchurian or see it
eclipsed by the rival railway.20 The first necessary
step was therefore a solid concession for the Chinchow-Aigun
line and to this purpose Straight negotiated with Manchurian
officials in the summer of 1909, after first pooling resources
with Pauling and Company. On October 2 he made a preliminary

agreement with the Manchurian officials, who exceeded their

 

20Vevier, pp. 82, 117—21; Croly, pp. 296-98.

181

orders in doing 50.21 There was no imperial edict to ratify
the agreement until January, 1910.

Straight's problem was complicated by the death of
Harriman on September 10, 1909. The rest of the American
Group were not informed of Harriman's plan except in the
vaguest way until Straight wrote to inform them, but
circumstances forced him to sign the October 2 agreement
before he had definite authorization from the Group. Thus
until the final signature, the Manchurian project remained
the scheme of Harriman and Straight. The government was
not involved, and the American Group's primary concern was
the Hukuang loan.22

Straight was hopeful of completing the railway
link, for J. O. P. Bland had returned from Russia in October
and reported that Russia was ready to admit British and
American capital into Siberia to build a line from Irkutsk to
Kalgan.23 Straight had hoped to go to Russia to complete
negotiations for this line and for the sale of the Chinese
Eastern after he had gained approval from the American Group.

Events intervened.

 

21Irick, p. 92.
22 .
Croly, pp. 303-05; VeVier, pp. 126—131.

23Vevier, p. 132.

182

Once the preliminary agreement for the Chinchow-
Aigun line was signed, the situation changed. The American
Group, disgusted with the complications on the Hukuang loan,
came to regard the Manchurian line as its primary interest,
and it was hoped that this concession would strengthen
America's hand in the Hukuang negotiations.24 It was at
this point that the State Department entered the scene with
the Knox Neutralization Proposal, and turned what on the
surface had been a private business negotiation into a
political project. Unfortunately for the Chinchow-Aigun
plan, it was precisely its political implications that
finally defeated it, whatever slim chance it might have had
as a business venture.

The Neutralization Proposal consisted of two alter-
natives. The first was a loan by the interested powers to
China to buy the railways (and highways) in Manchuria. If
this failed, the other alternative was for Britain and America,
whose nationals held the Chinchow-Aigun concession, to
support this concession and invite the other interested
powers to join the financing of the Chinchow-Aigun line and

any future railways in Manchuria.25 Knox proposed

 

24Vevier, p. 137; Croly, p. 301.

25Williams, ed. Diplomacy, p. 492.

183

neutralization as the first alternative because his primary
purpose was to eliminate the Russian and Japanese spheres

of influence in Manchuria. Under this plan the American
Group would have had a less prominent role than under the
second proposal. The suggestion for supporting the Chinchowe
Aigun railway was made to create a threat to Japan and Russia,
and force them into supporting the neutralization scheme.

The Knox Neutralization Proposal was based on Straight's
line of thinking, but there seems to have been no specific
consultation between the State Department and Straight, who
was in China, before it was put forth. Straight had not
consulted the Department on his negotiations with the
Manchurian officials, although he had informed them. He
at first approved the Knox proposal; later he became very
critical of its handling, particularly the snub to Russia.

It had become one of Straight's cardinal beliefs that Russia
must be placated and even admitted to the Hukuang and
Manchurian loans. The fact that Knox directed his proposal
against Russia is one indication that Straight had not been
consulted.26

Straight was also critical that the plan was published

before the Imperial edict ratifying the ChinchoweAigun

 

26Vevier, pp. 136, 138, 142-43; Croly, pp. 308-09.

184

railway agreement had been published, as this weakened
America's position abroad and undermined her good faith
with China.27

It is not clear from Vevier's account what communi-
cation there was between Knox and the bankers concerning the
Neutralization Proposal. Jacob Schiff of Kuhn, Loeb denied
any prior knowledge; Henry P. Davison, of J. P. Morgan,
said the American Group had been informed in late October
of the plan, but this does not necessarily mean that there
had been consultation. Vevier cites a State Department
dispatch to the Embassy in Tdkyo as evidence that "American
bankers had requested support for the Chinchow-Aigun line,”28
but this in no way implies a request for an international
proposal such as the Knox plan. It would certainly be
strange if businessmen, who had just reached a preliminary

agreement with the Manchurian officials for a profitable

concession and had strong hopes of concluding an agreement

 

7Knox had issued the Neutralization Proposal on
the basis of unofficial information received by Straight
that the edict had been promulgated (vevier, p. 141); but
this was not sound enough as the basis for an international
proposal. As late as December Straight and Henry P. Fletcher,
the American Charge d'Affaires in Peking, were still specu-
lating on whether the edict had been issued, which Fletcher
doubted (Irick, p. 99). In fact it did not come until
January, 1910.

28Vevier, pp. 141, 149-50.

185

with Russia, would want to upset negotiations at that point.
It is more reasonable to suppose that the Knox plan was the
outcome of a separate line of reasoning.

Knox moved into the political arena precisely because
there were political considerations that not only threatened
the success of the Chinchow-Aigun project but the political
balance in the Far East and the integrity of China. These
threats came from two directions. In May, 1909, the
Russians reached an agreement with China concerning the
administration in Harbin. The United States found this
Sino-Russian agreement unacceptable, and relations with
Russia remained strained throughout the summer.29 A note
verbale to Russia dated November 6, 1909, even hinted at
an offer to Russia to join the Hukuang loan if she would
recognize the open door in Harbin.3O This was in accord
with the views of Straight, who had argued that Russia's
sale of the Chinese Eastern Railroad would end the dispute
over Harbin by removing the legal basis on which she claimed
administrative rights in the city. This argument was accepted

in the State Department.31 Knox, however, instead of letting

 

29Foreign Relationstl910, pp. 208-17.
30Foreign Relations, 1910, pp. 218-20.

31Foreign Relations, 1910, pp. 225-26.

186

the dispute over Russian rights in Harbin lie dormant while
he discussed the Neutralization Proposal with Russia, con-
tinued to press the matter, and by so doing irritated
Isvolsky, the Russian Foreign Minister. Knox's insistence
on the American position over Harbin, blunder that it was,
suggests that the political principle involved there was
more important to him than the conclusion of a private
business agreement in Manchuria.

In addition to the Russian moves in Harbin, China's
sovereignty in Manchuria, already deeply compromised by Japan,
was further threatened in September by a new Sino—Japanese
agreement concerning railways and mines.32 Japan was also
threatening to protest to her ally Britain against China's
concession of the ChinchowaAigun line, as she had done
successfully in 1907.33 Moreover a proposed meeting between
the Japanese statesman, Prince Ito, and the Russian Finance
Minister, deovtsov, which never took place because of the
assassination of Ito, had produced rumors of a Japanese offer

to buy the Chinese Eastern Railway to prevent its sale to

America or China.34 Ito had long favored a Russo-Japanese

 

2
Foreign Relations, 1909, pp. 116-20.
33Vevier, p. 138.
34 . .
VeVier, pp. 144-45; Irick, pp. 94, 97. Fletcher

had cabled a warning about the Ito-KOkovstov meeting to the
State Department Oct. 30 (Varg, p. 103).

187

rapprochement, but Kokovtsov was supposed to favor the sale
of the Chinese Eastern to the Harriman interests. Rumors of
the sale of this railway to the Japanese were upsetting to
the Americans because a further drawing together of Japan
and Russia would put an end to Chinese sovereignty as well
as American commerce in Manchuria. On top of this worry,
there were secret troop movements in Manchuria by both
Japan and Russia.35

Although the Manchurian officials had favored some
form of international loans to Manchuria to offset Russian
and Japanese influence and had signed an agreement with
Straight, Peking was cautious and had no intention of
ratifying the agreement until there was official American
support to add political strength to economic. In any case
Peking officials on the whole preferred a general loan for
Manchuria to join; control of the railroad as envisaged by
the Straight plan. Although the American Charge d'Affaires,
Henry P. Fletcher, knew of this preference by NOvember 6,36
Washington probably was not aware of it before the Knox
plan was sent to Britain.

All commentators seem to agree that Knox badly

mismanaged the negotiations for implementing his plan,

 

35Irick, p. 96.

361rick. pp. 95-96.

188

especially those with Russia, but it is doubtful in View

of the international situation that he could have succeeded
with the most skillful diplomacy. The parallel of the

plan with the Open Door Notes is notable.37 In this case

a part of China, Manchuria, was threatened with partition.
and in the hopes of preserving Chinese sovereignty Knox
hoped to inject American financial interests to keep the
door open. Knox even admitted that the plan was ”somewhat
ideal,"38 but he may have hoped to pull some such coup as
Hay had managed with the Open Door Notes. As in 1899,
America was not prepared to support the plan with any kind
of military or political commitment to China or the other
powers, although it was hoped that financial power would
provide a substitute. The situation in 1909 differed from
1899, however. In the first place a specific American
financial interest was at stake instead of a general interest
in trade. More important, the alignment of European Powers
had shifted and the lines of antagonism had sharpened.

America had barely a potential ally in her efforts. as

. . . . . 39
Britain's cool reception of the Knox plan indicated.

 

37Griswold, p. 154.

38Quoted in vevier, p. 141.

39Foreign Relations, 1910, pp. 235—36.

189

Since 1900 Britain had become a firm ally of Japan, and once
she had negotiated her entente with France in 1904 and her
rapprochement with Russia in 1907 she had little to fear

in the East. Both Britain and France favored a Russo—
Japanese rapprochement, already begun in 1907, to complete

the circle against Germany. Only Germany showed any favorable
reaction to the Knox proposal, but it was too risky for her

to support it in the face of the other powers.

Straight was right in believing Russia to be the key
to the success of the Neutralization Plan. The Russians
were divided on what policy to follow in the Far East.
Kokovtsov and the financial interests favored the sale of
the Chinese Eastern, while Isvolsky favored a rapprochement
with Japan. Knox, by putting the ChinchowaAigun plan on a
political basis, placed the problem directly before Isvolsky,
and his methods of negotiation were such as to arouse all
Isvolsky's suspicions. But primarily Isvolsky was afraid
of Japanese power at his badk door, and without some sort
of American commitment to allay these fears, the success
of the Knox plan was most unlikely. Not only did Knox
fail to allay Russia's fears, but he made it fairly evident

that he considered Russia to be as great a threat as Japan.

 

40Reid, pp. 68-70, 89, 107-10, passim.

190

There was never any question of his reversing the balance of
power as established by Roosevelt by supporting Russia against
Japan.41

If creating opportunities for American capital were
the only consideration of the Knox plan, it is curious
that there was little debate on the merits of Isvolsky's
counter proposal for a Kalgan-Kiakhta line which would
sidestep Manchuria. This had been foreshadowed by
J. O. P. Bland's project of the previous fall, but it was of
no interest to the American Group except as a line of
negotiation with Russia. It was precisely this reaction
that convinced Isvolsky that America was playing politics,
and once he was sure the Knox plan had no strong support in
Europe, he was free to reject it. In July, 1910, he con-
cluded the agreement with Japan consolidating their respective
spheres of influence in Manchuria and Mongolia. This was
the end of American railway schemes in Manchuria.42

In the summer of 1910, after the collapse of the
Neutralization Proposal, the American Group sought to

withdraw from the China picture. They were tired of the

political maneuvers, the delays and indecision attendant

 

41Williams, Russian Relations, pp. 69—73.

42Vevier, pp. 155-57, 158-59, 160; E. H. Zabriskie,

American-Russian Rivalry in the Far East (Philadelphia, 1946),
pp. 157-65.

191

on doing business in China, and were afraid of the political
responsibility should America become engaged in conflict in
China. They feared public opinion would blame such conflict
on their search for profit. The Group was persuaded to
continue only after strong representations from Straight.
Huntington Wilson, Knox and finally Taft, and they agreed
only on the condition that they conclude no contracts likely
to arouse the opposition of other powers. This condition
would relieve them of all political responsibility.43
Surely if the promotion of American business abroad had been
the only purpose of the Taft administration, the efforts
employed to persuade American financiers to take care of
their own interests went beyond the call of duty.

The negotiations for the Hukuang loan had been going
on during this period. It is not necessary to follow them
in detail except to examine America's reasons for joining
them.

Charles Vevier has argued that America's interest
in taking part in Chinese loans was entirely economic. He
states that the attention of the State Department was drawn

to the competition by British, German and French interests

for a proposed Hankow—Canton railway loan in the fall of

 

43Vevier, pp. 163-65; Croly, pp. 339-44.

192

1908 by Selwyn Tait of the International Banking Corporation,
which had close ties with the National City Bank. As a
result Huntington Wilson instructed Rockhill to investigate
the situation in Peking. Rockhill was put off by the
Chinese, and the International Banking Corporation's efforts
between January and April, 1909, to join the loan did not
succeed. In May, 1909, bankers of the three powers signed
an agreement for sharing the proposed loan, which was also
to include a Hankow-Szechuan line. With the proposed
centralization of the Chinese railway system, which Straight
had already reported to Washington, such a monopoly of an
important loan meant a decided blow to any hopes for
American capital investment in China.

These developments, vevier maintains, led Huntington
Wilson to get assurances from J. P. Morgan and Company and
the International Banking Corporation that they were ready
to undertake Chinese loans, and with this economic backing
he sent a telegram on May 24 to Rockhill telling him to
request a share in the so-called Hukuang loan on the basis
of somewhat shaky claims for the financing of the Hankow-

Szechuan railway dating back to 1903.45 Straight then

 

44vevier, pp. 98—99.

45Foreign Relations, 1909. PP. 144-48. 155-56, 175-77.

193

approached Harriman and Jacob Schiff of Kuhn, Loeb and
Company. The Harriman interests, Kuhn, Loeb, J. P. Morgan,
the National City Bank and the First National Bank were
to constitute the American Group of bankers, formed on
June 11, 1909. The International Banking Corporation was
not included.

vevier maintains that it was significant that all
but the First National Bank had been active on the China
scene.46 This was not the case, however. The International
Banking Company, for which vevier claims the State Department
had first acted, was not included in the Group at all, and
its affiliate, the National City Bank, had no Chinese
connections. Moreover Morgan had not been active on the
China scene since the demise of the American China Development
Company. Harriman was involved in China only through
Straight's scheme for the Chinchow-Aigun line, the agreement
for which had not yet been concluded. The only approach to
the State Department for help in joining the Hukuang loan
had come from the International Banking Corporation, which
finally took no part in the transaction. The other banks
agreed to join the American Group only after they were asked

to do so by the State Department.

 

46vevier, pp. 105-06.

194

American bankers on the whole had shown little real
interest in China. In 1905, when the British had asked
whether America wished to take up her option on the Hankow-
Chungking line (in Szechuan), F. B. Loomis, Acting Secretary
of State, reported that there was no interest among American
capitalists, although the State Department had publicized
the opportunity.47 As late as 1908 the British bankers
sought allies in the National City Bank and the First National
Bank in their feud with the German bankers, and met with
refusal.48 Apart from the Straight-Harriman plans, there
were no other American railway loans under discussion in
China in 1909.49 As we have seen most American investment
was in Canada and Central America. In explaining why she
had not consulted America about the Hukuang loan, China
stated among other reasons that "everyone believed the
Americans had plenty of use for their money at home.”50

Not only does Vevier overemphasize the interest of

American bankers in China, but he mistakes the cause for

sending the May 24 telegram. America had been aware before

 

47Foreign Relations, 1909, pp. 147-48
48Vevier, p. 96.
49 .

Croly, p. 281; Griswold, p. 142.

50Foreign Relations, 1909, p. 174.

 

195

Selwyn Tait's information that negotiations were in progress
for a British loan. The British Ambassador, Durand, had
informed the United States in October, 1905, of Britain's
intention to go ahead with its option on the Hankow-Szechuan
route, and he had asked if America wished to act on her
option. Sir Edward Grey noted in 1909 that the negotiations
which had been in progress since 1905 were common knowledge.51
If the State Department knew of the loan negotiations long
before 1909. why did it delay so long in taking action?52

The fact is that the State Department had been moving
for some time in the direction of a more active policy in
China. A policy of American participation in Chinese loans
had been advocated for some time by Straight, Huntington
'Wilson and William Phillips, who had tried to put their
ideas into practice when Tang was in Washington in November,

1908. The change of administration brought their views to

the fore. and the agreement between British, German and French

 

51Foreign Relations, 1909, pp. 147, 149-50.

52Reid maintained that America acted at the time she
did because it was not until late May that she learned the
Hankow-Szechuan route was to be included in the tripartite
loan, and it was for this line America had the option
(p. 29). This is based on the evidence in Foreign Relations,
1909, p. 205. This seems to contradict Grey's assumption
that it was common knowledge that this line had been under
discussion since 1905.

 

196

bankers over the Hukuang loan finally precipitated action
by the State Department.

But perhaps equally important in determining American
policy was the change of regime in China at about the same
time as the American change of administrations. The death
of the Empress Dowager and Emperor, and the fall of the
Yuan Shih Kai Government in December and January, 1908-09,
brought many pro-Japanese elements into the Peking government.
The new regime was weak, and there was a renewal of foreign
concession hunting which threatened the territorial integrity
of China.53

The Taft administration entered the Hukuang loan not
just because a bankers' agreement threatened to cut off
American capital, but as part of a considered policy that
had been advocated by members of the previous administration.
This policy hoped to replace the practice of each nation
controlling a section of China through exclusive concessions
by establishing a united front of the powers to lend money
to China. While the agreement between the British, French
and German bankers might seem a step in this direction, it

was an uneasy truce in the German-British rivalry, and

 

53Reid. pp. 13-14, 23.

197

there were fears of a reversion to the old "spheres of
influence."54

As part of a consortium America would be in a better
position to mediate disputes between the powers and
influence the terms of loans to ensure the financial integrity
of China. Fletcher the American Charge d'Affaires, indicated
one kind of pnoblem the policy was designed to prevent when
he reported the terms of the tripartite agreement with
China of June 6, 1909. Fletcher had heard that associates
of J. O. P. Bland would try to interest American capital in
other China enterprises. ”It is very likely that money
will be offered to China freely on terms as good or better
than those [of Bland's associates] and there is some danger
she will be tempted to borrow more than sound principles
of finance will justify.”55

Another problem that had arisen from the competition
of the powers to gain concessions was the tendency to seek
security for the loans in provincial revenues, which clearly
hampered Chinese control of her finances. The first instance

of this practice was the German concession for the Tientsin-

Chinkiang railway, Which was reported to the State Department

 

54Foreign Relations, 1909, p. 205.

55Foreign Relations, 1909, p. 154.

198

in January, 1908. This contract pledged the likin and
other internal revenues of three provinces. A similar
provision appeared in the Hukuang agreement of June, 1909.
By the Commercial Treaty of 1903 America was pledged to the
removal of the likig, so that its application to a loan
agreement was clearly contrary to American views. Root
registered no protest to the German agreement in 1908, but
in June, 1909, Knox wrote:

The proposed hypothecation of Chinese internal
revenues for the flotation of which the United
States is entitled to participation at least must
therefore be regarded as involving serious
political considerations. [This makes it] of the
greatest importance that the United States Should
participate therein in order that this Government,
owing to its lien on the provincial revenues, may
be in a position to exercise an influence equal to
that of the other three powers in any question arising
through the pledging of these levies and to enable
the United States, moreover. at the proper time
again to support China in her endeavor in securing
the abolition of likin and the increase of the
customs tariff.56

The cooperative policy was an effort to apply the
open door policy to financial investment as well as commerce.
A State Department memorandum of September 30, 1909, ex-
plained the policy that was already in effect.

If China is to develop industrially as an independent
political unit, the aid it receives from other

 

56Foreign Relations, 1909, p. 160. See also
Foreign Relations, 1908, p. 200.

199

countries must be distributed in a manner to prevent
any partisan domination at the capital. The nations
that finance the great Chinese railways and other
enterprises will be foremost in the affairs of China
and the participation of American capital in these
investments will give the voice of the United States
more authority in political controversies in that
country which will go far toward guaranteeing the
preservation of the administrative entity of China.57

The memorandum went on to point out the threat to the
Philippines if other countries dominated China.

In urging the British to admit the United States to
the loan, Knox stressed the cooperative policy. He
instructed Ambassador Reid in London

. . . to point out [to the British Foreign Minister]
the menace to foreign trade likely to ensue from
the lack of proper sympathy between the powers most
vitally interested in the preservation of the
principle of equality of commercial opportunity, and
to add that the Government of the United States
regards full and frank cooperation as best calcu-
lated to maintain the open door and the integrity
of China, and to state that the formation of a
powerful American, British, French and German
financial group would further that end.58

That the cooperative policy was not merely an excuse
to push American capitalists into the Hukuang Loan was
demonstrated later by the fact that America sought to include

the other three powers in the Currency Reform Loan and to

maintain the united front in the non-financial problem of

 

57Quoted in Griswold, p. 144.

58Foreign Relations, 1909, p. 152.

200

recognizing the new Chinese republic.

Once America won the right to participate in the
loan, the agreement that had been reached by the tripartite
bankers with China had to be revised. Straight, as agent
for the American group, went to London to work out America's
share in the loan. Faced with the antagonism of the
European bankers, he was ready to accept a share smaller than
that of the European powers. The State Department would
not accept this and insisted on an equal share even if this
jeopardized the whole negotiation. Huntington Wilson tele-
graphed angrily to Whitelaw Reid in London where the bankers
were meeting that "the pledge of China and its interpretation
are official matters concerning only the Governments of the
United States and of China and that these Governments have
no differences on the subject.” He concluded:

If the banking syndicate which undertook to sustain
the American policy of equal participation ignore

the national aspects of the transaction, or fail to
cooperate in the broad purpose in View, the

Government will seek other instrumentalities to secure
proper American recognition; that it should be clearly
understood that this Government is interested purely
for broad national reasons; that the Government alone
has any rights in this matter; and that it holds such

rights in trust for the good of general American
interests in China.59

 

59Foreign Relations, 1909, pp. 169-71.

201

The details of America's share in the loan took
nearly a year of wrangling to complete. An agreement between
the bankers of the four powers was reached in May,1910,
and it was another year before the final agreement with
China was concluded, in May, 1911. Even after the conclusion
of these negotiations, nothing came of the agreement because
meanwhile new problems had arisen. There was increasing
opposition to the loan within China, and a growing instability
of the Chinese government which by summer, 1911, faced civil
war. In addition there was strong opposition to the loan
from Russia and Japan.

In the summer of 1910 a new opportunity for American
loans to China arose with the desire of the Chinese government
to contract a loan for currency and tariff reforms. The
Chinchow-Aigun railroad and the Knox Neutralization Plan
had come to nothing, and the Hukuang loan was still entangled
in talk. The American government was anxious to recover
prestige as well as continue its policy of strengthening
China through cooperative aid.

In the fall of 1909 and again in the summer of 1910
NBnchurian officials were negotiating with British and German
interests for a loan to establish a Manchurian bank for

development and reforms in that region. Straight urged

202

the American Group to protest on the basis of its prior
interest through Tang's proposals of 1908. The Chinese

did not recognize the validity of the Tang agreement, and
while both the American Group and the tripartite group (as

it had become) were ready to accept the other, each wanted
its prior claim recognized. Straight, in urging the American
protest, may have been motivated by a desire to establish
American economic supremacy in Manchuria; or he may have

been mainly concerned to ensure that China made a reasonable
financial arrangement and to prevent competition between

the powers.60 There were strained relations between the

State Department and the Group because each was acting
without consultation with the other. According to vevier the
Manchurian bank loan ”was not an end in itself and had no
great interest for the American Group; but once the
American-claimed financial position in Manchuria was threatened,
the project became a device to avow the supremacy of American
rights and gain access to international money markets for

the sale of bonds."61

If this was really the case, the Chinese did not see

it that way. They ended the impasse over the Manchurian

 

60Vevier, pp. 171-73. While Vevier notes all these
reasons, he considered loyalty to American financial interests
as the primary reason.

61vevier, p. 175.

203

loan by subordinating it to a general loan to China for
currency and other reforms, and sought this loan from America
alone. They made their request to the American Government,
not to the bankers' syndicate. They asked America to send a
financial advisor before the other powers heard of the
proposal.62 A preliminary agreement was reached on October
27, 1910, by which China permitted other powers to share in
the loan provided only the American Group signed and issued
the bonds.63 The United States was interested in the loan
because it offered an opportunity to introduce capital into
Manchuria as well as help reforms in China proper.

The right to share with the other powers was included
in the agreement for a number of reasons. The State
Department and Straight believed that only through joint
action could Chinese financial reforms be made to work
because they were so dependent on the cooperation of the
other powers. A memorandum from Knox to the Chinese stated
that ”the aim of American policy [in all the negotiations]
has been to secure a sympathetic and practical cooperation
of the Great Powers in maintaining the political integrity

of China by making it to the interest of each to support

 

62Foreign Relations, 1912, pp. 89,90.

63Foreign Relations, 1912, p. 91.

204

such a policy."64 The bankers themselves also favored a
cooperative policy because one of the conditions on which
they had continued on the China scene in the summer of 1910
was that they would undertake no loans to which other powers
objected. Moreover there was doubt that the American Group
alone could raise such a large loan,65 an indication that
domestic economic pressures were not involved in the desire
for loans to China. Consequently, the First International
Consortium for China was formed in November, 1910, by British,
French, German and American banks for future loans to China.
America held a somewhat independent position with regard
to the Currency Loan, for which she alone held the agreement
with China, but she was to seek from China the permission
for the others to enter. The Consortium did not extend to
the ChinchoweAigun concession, which the American Group
still held, nor to the Hukuang Loan, for which there was a
separate agreement.

Negotiations for the entry of the other powers into
the Currency Reform Loan became entangled, among other
issues, in the problem of sending a financial advisor to the

Chinese government. Straight and the State Department

 

64Foreign Relations, 1912, p. 93. See also Croly,
pp. 349-51.

65Vevier, p. 178; Croly, pp. 350, 344.

205

differed in their views on the problem. Washington was
concerned with American prestige and wanted to insist that
the advisor be American; Straight felt that concession should
be made to Chinese sensibilities.66 In addition the Chinese
were objecting to the monopolistic power of the Consortium
which prevented their playing off the powers against each
other. The British and German interests were half-hearted
about the cooperative venture, and the Russians and Japanese
were objecting to the Manchurian aspects of the agreement.67
Despite these obstacles, an agreement for the entry of
British, German and French interests in the currency loan
was finally reached in April, 1911, a month before the final
Hukuang loan agreement.

Both agreements were overshadowed in China by the
gathering revolutionary storms and the more immediate problems
of the Yuan Shih Kai government which, needing money to
exist at all, sought an advance on the Currency Reform Loan
for administrative purposes.68 The situation soon became
almost hopeless. On the one hand the bankers were under-

standably reluctant to lend money to a regime so weak, without

any economic reforms by China that would guarantee some

 

66Vevier, pp. 182-83; Croly, pp. 372-78.
67Vevier, pp. 180-87; Croly, pp. 372-97.

68Foreign Relations, 1912, p. 101 passim.

206

stability to the financial situation. On the other hand,
the more America pressed reform on the Chinese government,
the more it weakened the prestige of the central government
in the eyes of the Chinese, and, despite the cooperative
policy, aroused the suspicions of the other powers. Russia
and Japan were unalterably opposed to any loans for development
in Manchuria, and France and Britain were tied by their
respective alliances to Russia and Japan. Britain again
showed her hand on the question of the open door by renewing
the Anglo-Japanese Alliance in July, 1911, with no effort
to restrain Japan as the price of agreement. The alliance
this time was aimed at Germany, not Russia. Only Germany
was interested in the integrity of China but was restricted
by her isolated diplomatic position. America was, as
always, limited in her power to act in China, and by intruding
herself on the scene tended to press the Chinese government
into a position that could not be defended.6

The request of the Chinese for an advance on the
Currency Reform Loan created a further dilemma because the
lending powers were not agreed on whether to support Yuan's

government.7O Knox favored a position of neutrality between

 

69Reid. PP. 150. 184-85, 196. 198, 205-08. 222-24
passim; Griswold, pp. 165-69.

70Foreign Relations, 1912, pp. 103-05.

 

207

the two Chinese factions hoping they would reach a mogug
vivendi before any loans were made. The refusal of the
Consortium to lend money weakened Yuan's control in the North
and thus his bargaining power with the regime in the South.
He was compelled to negotiate loans with other international
groups on terms that were financially hazardous, thus risking
further foreign intervention in China. The prevention of
such loans had been one of the objects of the Consortium,

yet its own refusal to lend money did not help China.

It is clear that any loan to China at this stage
would have been hazardous and purely political in intent.
Since the western governments were working through commercial
channels, a loan for political purposes alone could not be
considered. The pressures by Russia and Japan to enter the
consortium, in order to hinder the Manchurian aspects of the
Currency Reform loan or to break up the consortium altogether.
completed the devastation of the Taft-Knox policy in China.71

By the end of 1912 the American bankers were again
considering abandoning the China field by leaving the
Consortium. They had only signed the agreement in June to

include Russia and Japan on Taft's urging. With the coming

to power of the Wilson administration, which refused to

 

71Foreign Relations, 1912, pp. 99-100, 114, passim;
Vevier, pp. 200-01.

 

208

support their activity, they withdrew completely from
Chinese affairs.72

The China policy of the Taft regime, which received
much of its inspiration from Willard Straight, tried to
achieve a combination of political and economic ends by
economic means exclusively. The contrast of this policy
with that of Roosevelt is clearly revealed in Knox's reply
to the letter Roosevelt addressed to Taft in 1910 on the
question of Manchuria.73 Knox first said that he failed to
see the essential connection which Roosevelt had made between
Manchuria and the problem of Japanese immigration. He went
on to say:

Why the Japanese should think that we ought to
accept the observance by them of one treaty right due
from them to us as an offset for the disregard by them
of another treaty right [in Manchuria] due from them
to us I cannot understand . . .

We have no desire or intention to interfere with
any legitimate purpose of Japan in Manchuria. We do
not care how many of her people she may send to
Manchuria nor to what extent she may avail herself
of her commercial opportunities there, provided in
so doing she scrupulously respects the equal rights
of others. Nor have we given Japan at any time
just cause to think that we wished to interfere.

The opinion expressed by Lord Kitchener that Japan
needs Manchuria for any legitimate purpose any more
than she now has by right, is also open to question.
Commercially she is most advantageously situated, and

 

72Vevier, pp. 201—05.

73See above, Chapter V.

209

strategically she is in a position to throw troops
quickly into Manchuria over her two or three lines
of railways. Why the Japanese need Manchuria any
more than does China, who own it now, or why it is
any more ”vital" to them than to China is not
apparent.

I admit that reference to the ”Open Door" has
frequently been abused, often through misunderstanding
of what was meant by the expression. What we mean by

the ”Open Door" in Manchuria is surely nothing more than

fair play for our commercial interests, which certainly
are not insignificant, and for China. territorially
and administratively.

That certainly is the meaning of our policy in
China as enunciated by Secretary Hay and continued and
developed under your Administration. The aim of the
present Administration has been merely to reduce the
theory to practice . . .

Whether the American people would ever go to war
or not in defense of our interests in China I am not
prepared to say. It might depend upon the nature of
the provocation. But in any case it certainly is not
for us to prejudice our case at the start by admitting

to the world that we would not, under any circumstances,

go to war. We can at least allow others to draw their
own conclusions.74

Whereas Roosevelt regarded it beyond America's
ability to influence affairs in Manchuria and not worth the
risk of antagonizing Japan, Taft and Knox regarded the
preservation of China's integrity, including Manchuria, as
of primary importance. They apparently did not agree with
Roosevelt's estimation that America would never fight over

China. Yet Taft and Knox were faced with the same refusal

by Congress to make any binding commitments to other countries

 

74Quoted in Reid, p. 183.

210

of a military or diplomatic nature, and the same lack of
public interest in China which Roosevelt faced. They hoped,
therefore, to use financial in place of military and political
power to achieve their ends. This proved to be a crude
weapon, hard to manipulate and essentially ineffective against
the opposition it faced in the Far East.

While there were many mistakes made in negotiating
the Knox Neutralization Proposal and the various loan
agreements, it seems hard to conceive that any of them
could have succeeded even with perfect diplomacy in the face
of the European antagonisms involved, the expansionist
tendencies of Japan, and the weakness and vacillations of
the Chinese government. If America had been prepared to
apply military force or to conclude a diplomatic alliance;
if even one of the European powers had been prepared to
play America's game; or if the Chinese government had taken
a strong stand, conceivably one or all of these plans might
have succeeded.

A certain amount of ill luck also attended America's
efforts to uphold the integrity of China through strengthening
her economy. The changes in the Chinese government in the
winter of 1908-09 undermined Tang's negotiations with Harriman
at a time when an agreement might have turned the scales in

China. The death of Harriman and the confusion in the

211

instructions to Rockhill for presenting the Neutralization
Proposal were other chance events that added to America's
difficulties.

The whole situation presented a dilemma ignored by
the economic theory of imperialism. Here was a backward
nation that had at last decided it needed to modernize, not
only to improve the welfare of its people, but to gain
sufficient strength to maintain its independence. In order
to do so it needed capital which was not available at home.
Capital abroad could only come from private sources. But
private_sources would not lend without a certain security
for the loan. This problem was magnified by the instability
of the Chinese regime. Moreover, however good the intention,
business propositions in China were bound to become entangled
in politics. In the first place loans were always made to
the government, not to private corporations; any dispute over
terms or interpretations of contracts, therefore, became
diplomatic problems. Secondly, by 1909 the interests of
the European nations had become so great in China that
European power struggles were always reflected on the

China scene.

CONCLUSION

The economic interpretation of imperialism has had
wide acceptance. It is a plausible and easily grasped
formula that can lead to oversimplification in the hands of
historians. It became the popular interpretation of events
by historians who wrote in the period following the First
World War through the 1930's, when with the activity of the
dictators compelled historians to seek new interpretations
of the origins of imperialism. Nevertheless the economic
view and the concept of the banker and businessman as villain
has remained well entrenched in historical writing. Aside
from any possible theoretical objections to the economic
theory as expounded in Leninist and Marxist dogma or in the
more liberal analysis of Hobson, there can be found many
shortcomings to the theory when one applies it to a given
historical period. It is to be hoped that the foregoing
chapters offer an example of the weaknesses of the theory as
applied to American foreign policy in China during the heyday
of American imperialistic enthusiasm at the turn of the
last century.

Despite grandiose hopes for the China market,
America had a relatively small economic stake in China in

this period. Her investments in 1900 were negligible, and

212

213

they were still comparatively low fourteen years later,
despite many efforts in the interim to bolster her investment.
American trade was substantial in a few products, notably
cotton, but the total was never of sufficient weight to
create a formidable pressure group in America or to account
alone for the government's interest in China.

Since policy is carried out by individual men, what—
ever the weight of general economic trends, it is important
to discover the aims and problems of the individual states—
men. The proponents of the so—called ”large theory" at the
end of the century were influenced by an intellectual climate
that stressed considerations quite different from the economic
ones. The themes that found most expression in contemporary
writing about world affairs in general and China in particular
were: (1) variations of Social Darwinism that emphasized
competition, struggle and power in international affairs;

(2) a desire to save ”civilization” from the threats of
barbarism or alien civilizations; (3) as a corollary to this
desire a belief in an American or an Anglo-Saxon mission

to spread the benefits of democracy; (4) a nationalism that
stressed prestige and honor as well as noblesse oblige for
the richer nations, such as America had become. For a

variety of reasons China played a crucial part in all these

theories.

214

At the turn of the century America entered the world
stage for the first time to take part in events and decisions
of world wide importance. Because of the belief in the
importance of China in the struggle of civilizations and in
the balance of power in Asia, America regarded her national
interest as bound up with the territorial and administrative
integrity of the moribund empire which was threatened by
encroachments from the European powers. It was believed
that this purpose could be achieved at the same time that
we fostered our own trade and financial interests. The
policy was formulated by Hay and Rockhill and expanded by
Taft and Knox. There was a certain drawing back by Roosevelt.
He did not abrogate the open door policy toward China, but
his greater concern with Japan meant a neglect of China during
his administration.

America's policy was marked by blunders and naiveté
and like most national policies it was not always consistent.
The effectiveness of the policy was hindered by two things:

a frequent ignoring or ignorance of the European alliances
and rivalries that influenced events in the Far East; and

the refusal of the nation or the Congress to support any
decisive action in this part of the world. Since America
refused to resort to arms or to become involved in entangling

diplomatic alliances, American power to influence decisions

215

was limited to economic pressure and moral suasion, which
could be of some significance on occasion but was never
decisive.

Given the situation she faced in Asia and the limitations
on her ability to act. it is perhaps remarkable that America
accomplished anything. China was weak and indecisive, and
at certain periods close to anarchy. Russia and Japan who
both had expansionist dreams were in a strong strategic
position to press their demands on China. England, who could
no more have sent an army to China than America, was isolated
in Europe at the turn of the century. Needing support to
protect India, she formed an alliance with Japan. This
tended to deprive America of England's support in China, and
may even have encouraged Japanese aggression. The French
alliance played a similar role for Russia; and Germany squeezed
between Russia and England in Europe, had to play a cautious
role in the Far East. The British-Russian entente in 1907
and the Russo-Japanese agreement in 1910 completed the
isolation of America in the Pacific.

In the absence of support from Congress or public
opinion, the government had to uphold what it regarded as
America's long term political interests in Asia by using

the limited economic interests available. These were

216

never great enough in themselves to warrant committing
American arms in their defense, and because of their
weakness American policy succeeded in China only when

the international climate was temporarily favorable.

BIBLIOGRAPHY

United States Government Documents and Publications

Some important State Department documents are published
in Papers Relating to the Foreign Relations of the United States
(Washington) of which the years from 1898 to 1912 were
consulted for this study. Since the documents for each year
were selected for publication the following year, there are
obvious limitations to the material which could be made
available. In the case of United States relations with many
countries the documents were limited to trivia, but an
exceptional candor appeared in the selection for China,an
indication perhaps that the State Department felt it had no
ulterior motives in its China policy.

Supplementary material on official relations with
China appear in Consular Reports, Shanghai, General Records
of the State Department, Record Group 59, Vbls. 45-53 (on
microfilm), which cover“ the years 1899 to 1906 when the
Consular Service was reorganized. Shanghai was selected for
special study because it had the largest international
settlement in Northern China, and was a major port for
American trade. In addition to the many documents of a

routine nature, there are scattered letters and reports on

217

218

events of a wider significance which, when not directly
applicable to this study, provided useful background information.

The Shaping of American Diplomacy, ed. by William
Appleman Williams (Chicago, 1956% a book of readings and
interpretive comments by the editor, gives the text of some
important policy documents in an accessible form, as well
as reprinting pertinent journal articles from scattered
sources.

The Statistical Abstract of the United States (Washington)
published each year for the previous year, provided some
statistical information on trade with China. More detailed
information appears in the Monthly Summary of Commerce and
Finance of the United States (Washington). The December
issues for the years 1899 to 1912 were consulted. In
addition to these, scattered statistical information on
market conditions in China appear in three Special Consular
Reports: Foreign Markets for American Cotton Manufacturers,
Special Consular Report, Vol. XXXVI (Washington, 1905);
George E. Anderson, Cotton-Goods Trade in China, Special
Consular Report No. 44 (Washington, 1911); George E.
Anderson, Railway Situation in China, Special Consular Report

No. 48 (Washington, 1911).

219
Private Papers, Letters, Biographies

The Letters of Theodore Roosevelt, 8 Vols., ed. by
Elting E. Morison, John M. Blum, John J. Buckley (Cambridge,
Mass., 1951) was the most useful, as well as the most
enjoyable documentary source used in this study. Roosevelt
wrote with candor and at length his views on just about
everything. A student usually has good evidence of what he
thought on any problem at a given time, although he must be
wary of Roosevelt's egocentricity and lapses of memory after
the event. Special mention must be made of Elting E.
Morison's introduction to Volume Five which is a stimulating
essay on Roosevelt's personality and intellectual outlook.
Roosevelt's public writings are collected in The Works of
Theodore Roosevelt, Memorial Edition, 24 Vols.(New York, 1924).
The Letters and Friendships of Sir Cecil Sprinngice, 2 Vols.,
ed. by Stephen L. Gwynn (Boston and New York, 1929) is useful
for the ideas which Spring Rice was expressing to Roosevelt
as well as his comments on the American scene. The letters
from Roosevelt printed here are also published in their

entirety in Roosevelt Letters. Similarly the Roosevelt

 

letters in Selections from the Correspondence of Theodore
Roosevelt and Henry Cabot Lodge, 1884-1918, 2 Vols. (New
York, 1925) are reprinted in Morison's edition. The Lodge

letters here printed add little to the understanding of Far

220

Eastern affairs. William Roscoe Thayer's The Life and Letters
of John Hay (Boston and New York, 1915) is sketchy and now
superceded.

A number of biographies have been useful in providing
material from other private papers not available for use in
this study. Tyler Dennett's John Hay: From Poetry to
Politics (New York, 1933) is well organized and very readable
but lacks detailed information on many aspects of Hay's
policy. Moreover it was written before other documents, such
as the Rookhill papers, were available. Paul A. Varg's ngg
Door Diplomat: The Life of W. W. Rockhill (Urbana, 1952) not
only fills many of the gaps on the formation of the open
door policy and later developments, but presents some
perceptive insights on the mainsprings of American policy.

It is a succinct and balanced account of the life of a key
diplomat. A mature analysis of Roosevelt's outlook on the
world as well as of his strengths and weakness as a statesman
is provided in Howard K. Beale, Theodore Roosevelt and the Rise
of America to World Power (Baltimore, 1956). Philip C.

Jessup made a thorough study of the Root papers for his
detailed biography, Elihu Root, 2 Vols. (New York, 1938) which
gives a balanced judgment on some controversial issues. Two
works are based on the crucial Willard Straight papers,

which are in private hands. Herbert Croly, a friend and

221
admirer of Straight, presents the events surrounding the
Chinese loan negotiations in a biographical context in
Willard Straight (New York, 1924). This is an attractive
book with lengthy quotations from Straight's private diary
and personal letters, illustrated profusely with Straight's
own sketches. Its usefulness is marred by a total absence
of documentation or index. Charles vevier, The United States
and China, 1906-1913: A Study of Finance and Diplomacy
(New Brunswidk, 1955) draws not only on the Straight papers
but a wide variety of private papers and government documents
to give a diplomatic history of the events in China. His
facts do not disagree with those given by Croly, but he gives
a different interpretation to the role of the financiers
in the formation of American policy. Henry Fowles Pringle's
two biographies, The Life and Times of William Howard Taft,
2 Vols. (New York, Toronto, 1939) and Theodore Roosevelt:
A Biography (New York, 1956) were useful for background
information but do not deal with foreign policy in detail.
Similarly John A. Garraty, Henry Cabot Lodge: A Biography
(New York, 1953) and George Kennan, E. H. Harriman: A
Biography,2 Vols. (Boston and New York, 1922), added nothing
on the situation in the Far East. The memoirs of Lloyd C.
Griscom, Diplomatically Speaking (Boston, 1940), and F. M.

Huntington Wilson, Memoirs of an Ex-diplomat (Boston, 1945),

222

both proved disappointing.

On the Economic Interpretation of Imperialism

The economic interpretation of imperialism has rested

largely on the theories presented in J. A. Hobson, Imperialism:

 

A Study (London, 1948) and Nikolai Lenin (V. I. Lenin),
Imperialism (New York, 1939). An important work by an
economist, E. M. Winslow, The Pattern of Imperialism (New
York, 1948), combines a history of the development of the
economic interpretation of imperialism with an incisive
analysis of the assumptions of the theory. Charles A.

Beard makes some important contributions of his own to the
economic theory as well as a provocative presentation of some
aspects of American history in The Idea of National Interest
(New York, 1934). His ideas are expressed again in a brief

work, A Foreign Policy for America (New York, London, 1940).

The Contemporary View of the Period

A number of books written at the turn of the century
might be classed with the papers of statesmen as giving a
contemporary view of world affairs. The expansionist view
is given clear expression in three books by Captain Alfred
T. Mahan, The Influence of Sea Power Upon History, 1660-1783

(Boston, 1890); The Interest of America in Sea Power Present

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and Future (Boston, 1897), and The Problem of Asia and its
Effect Upon International Policies (Boston, 1900), and in
Brooks Adams, America's Economic Supremacy (New York, 1947).
The anti-imperialist view as expressed in Paul S. Reinsch,
World Politics at the End of the Nineteenth Century as
Influenced by the Oriental Situation (New York, London, 1925),
which was first published in 1900, bears many resemblances

to the views of the expansionists. Henry Adams, The

Education of Henry Adams (New York, 1931), is both a commentary
on and a reflection of the ideas and historical forces at

the end of the nineteenth century.

The Economic Background

C. F. Remer, Foreign Investments in China (New York,
1933) is an exhaustive study of the very complex problem of
Chinese finances based on the work of an international team
of experts, and was invaluable in this study. Remer's
earlier work, The Foreign Trade of China (Shanghai, 1926)
proved less useful because it does not give a detailed
picture of each nation's trade with China. Charles S.
Campbell, Jr., Special Business Interests and the Open Door
Policy (New Haven, 1951) has much useful information on the
interests that supported the open door and their activities

yet does not overemphasize their importance.

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General Histories

For the period it covers, John Gilbert Reid, The
Manchu Abdication and the Powers, 1908-1912 (Berkeley, 1935)
is invaluable. It gives an almost day to day account of the
international diplomatic negotiations concerning China, and
a sound analysis of the policies of the Great Powers. Its
strictly chronological organization, however, makes it
difficult to use in following any given problem, and more
recent information changes the picture in detail. For the
period of the Boxer Rebellion, Chester A. Tan's The Boxer
Catastrophe (New York, 1955) is a useful account which draws
on Chinese sources. A colorful account of Chinese court
intrigues at this time appears in J. O. P. Bland and E.
Backhouse, China Under the Empress Dowager: Being the
History of the Life and Times of Tzu Hsi (Boston and New YOrk,
1914). Edward H. Zabriskie, American—Russian Rivalry in the
Far East: A Study in Diplomacy and Power, 1895-1914
(Philadelphia, 1946) is a sound and detailed study. William
Appleman Williams, American-Russian Relations. 1781-1947 (New
York, 1952), which covers the period of this study in less
detail, is provocative but far less reliable than Zabriskie.
A history of American policy toward China since the Open
Door Notes, A. Whitney Griswold, The Far Eastern Policygof

the United States (New York, 1938) has been a standard work

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for almost a quarter of a century. Griswold combines a
wealth of information with a distinctive point of view.

Another standard work, William L. Langer, Diplomagy of

 

Imperialism (New Ybrk, 1951) is important for the European
background of the Far Eastern situation, although the book
ends with the year 1902. Two textbooks, G. Nye Steiger,

A History of the Far East (Boston, etc., 1944) and Harold M.
Vinacke, A History of the Far East in Modern Times (New York,

1950) were occasionally useful for references.

Other Works Used

Richard Hofstadter, Social Darwinism in American
Thought, 1860-1915 (Philadelphia, 1944). Robert Osgood,
Ideals and Self-Interest in American Foreign Relations
(Chicago, 1953). Arthur Meier Schlesinger, Political and

Social Growth of the American People, 3rd ed. (New York, 1941).

George F. Kennan, American Diplomacy, 1900—1950 (Chicago, 1951).

Articles

William R. Braisted, ”The United States and the
American China Development Company,” Far Eastern Quarterly,
Vol. XI (Feb., 1952); also reprinted in The Shapingyof
American Diplomacy, ed. Williams. Braisted does a useful

service in drawing together scattered government documents on

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the relations with the company.
Raymond A. Esthus, "The Changing Concept of the Open

Door, Mississippi Valley Historical Review, Vol. 46 (Dec., 1959)
is a provocative interpretation.

Harvey Pressman, "Hay, Rockhill and China's Integrity,
A Reappraisal” has some suggestions on interpreting the
Rockhill-Hippisley correspondence. Robert L. Irick, ”The
Chinchow-Aigun Railroad and the Knox Neutralization Plan

in Ch'ing Diplomacy,‘ gives an account of the Chinese side
of these negotiations based on Chinese sources. Both
articles were graduate seminar papers at Harvard University

and published in Papers on China, from the East Asia Regional

Studies Program, Vol. 13 (Dec., 1959).