Moral diplomacy is a foreign-relations policy that only supports other nations whose governments uphold acceptable ethical standards. This differs significantly from dollar diplomacy, which focuses on protecting and increasing material interests on foreign soil regardless of a country's moral stance.
President Woodrow Wilson, who served from 1913 to 1921, created the policy of moral diplomacy as a reversal of policy from the dollar diplomacy of the previous administration. In his July 4 speech in 1914, Wilson explained his belief that the Declaration of Independence established the expansion of democracy as the government's duty and the responsibility of every patriot. Moral diplomacy furthers those ends by only using supporting financial interests that shore up reform and by withholding investment or commercial development in countries where human rights and freedom are denied.
Dollar diplomacy, established by President William Howard Taft, made the goal of diplomacy to expand investment and protect American commercial interests in all foreign markets, whether or not those countries were democratic in nature. In his Address to Congress in 1912, focusing primarily on Central America, the Caribbean and China, Taft voiced his conviction that expanding American markets overseas furthered the political stability of foreign countries by encouraging their economic growth. In theory, such growth promoted peace. History proves that increases in American holdings overseas did not foster peace or foreign political stability.