BACKGROUND
This is the second article of a series on Foreign Direct Investment (FDI). The purpose of this article is not only to provide the reader with a historical and philosophical background on FDI, but also to provoke thought and encourage readers to question their own assumptions, beliefs, or understanding. Despite the optimistic numbers, [1]Global FDI fell by 11% in the first semester of 2025, marking the second consecutive year of decline and confirming a deepening slowdown in productive capital flows, according to the World Investment Report 2025. In this article I argue that FDI can flourish without the support of a capitalism system that limits the free movement of labor and hinders the transfer of know-how.
The British philosopher, Ludwig Wittgenstein, argued that words don’t have fixed meanings — instead, they get their meaning from how they’re used. The three-word phrase, FDI is a case of semantic satiation in today’s world, a phenomenon that has diminished the complexity of FDI, and perhaps led to a dystopian understanding of it. A dystopian view of FDI portrays it as a form of economic imperialism that benefits foreign corporations at the expense of the host country. This perspective emphasizes negative outcomes like job displacement by foreign competitors, the exploitation of natural resources with little local benefit, capital flight as profits are repatriated, and the undue political influence of powerful foreign companies on the host government. So, what is the solution?
IN DEPTH
Critics argue that FDI can lead to increased pollution, create a dependency on foreign capital, and undermine a nation’s economic and national security interests. The rise of populism and ineffective domestic governments policies have led to a widespread misperception of FDI, often using it as an interchangeable synonym for capitalism. However, the same conditions that help capitalism do not necessarily coexist with FDI, for instance. In fact, we can argue that in many cases, capitalism, in its most ruthless form, is an obstacle to the tool of FDI, limiting the free movement of labor and know-how. To better explain what I just asserted, let’s give a quick glimpse into two recent disputes. The first dispute involves the United States and South Korea. The second dispute involves the Netherlands and China.
[1] https://unctad.org/news/global-foreign-direct-investment-falls-second-consecutive-year-posing-acute-challenges
- Hyundai-LG battery factory in Georgia
In early September 2025, over 300 South Korean workers were detained by ICE during a raid at a Hyundai battery plant construction site near Savannah, Georgia. Most of these workers were on short-term visas or visa waiver programs and were being used for specialized work on the new plant. This incident shows how capitalism can paradoxically hinder the growth of FDI in a host country. The September 2025 arrest and detention of hundreds of South Korean workers in the U.S. demonstrates how inconsistent domestic law enforcement and unclear visa regulations can create significant risks and uncertainty for FDI, straining diplomatic and economic relations. The raid instilled fear and reluctance among South Korean companies with plans to invest in the U.S. South Korean President Lee Jae Myung explicitly warned that the incident could have a “considerable impact on foreign direct investment in the U.S.,” leading some firms to question if investing in the U.S. was worth the potential risks. After the raid, several South Korean firms reportedly paused or pulled out of investment projects in the U.S., despite reassurances from the U.S. government. The specific plant in Georgia experienced construction and start-up delays of several months because specialized workers and engineers were detained or chose to return to South Korea out of fear of re-arrest. Limitations over the movement of labor can also affect the transfer of know-how from one country to another. When investing in a country, the investor not only brings in capital in cash but also transfers in-kind capital such as machinery, materials, scientific knowledge, management know-how, and market access capabilities. Hence, in the long run, these are the most fundamental benefits for the host country.[2] The brutalization of the U.S. capitalism has often led to the financialization of the economy, where corporations focus on short-term financial gains (like stock buybacks or high dividends) rather than long-term, potentially riskier, investments in research and development (R&D) or building new capacity that could facilitate significant know-how transfer.
In conclusion, the ‘Hyundai case’ shows a conflict between the U.S. capitalism, its restrictive immigration policies, and the need, on the other hand, for the U.S. to open its doors to foreign workers who have the expertise and the know-how necessary to manufacture certain products. The most recent U.S. domestic policies have created uncertainty for foreign investors who rely on their own skills and knowledge to complete large projects in the U.S. The truth is that the U.S. economy benefits significantly from FDI. Nonetheless, there are factors suggesting FDI may decrease in the U.S. in the following years due to increasing tariffs, trade policy uncertainty and political instability.
- The NEXPERIA Case
[2] Debunking the Myth of Foreign Direct Investment toward Long-Term Sustainability of a Developing Country: A Transaction Cost Analysis Approach – Hoang Viet Nguyen, Thanh Tu Phan, Antonio Lobo
On September 30, 2025, using a law called the Goods Availability Act, the Dutch government, under the U.S. pressure, took control of Nexperia, a chip company headquartered in the Netherlands but owned by a Chinese company called Wingtech. This sparked a trade dispute that led to China imposing an export ban on Nexperia chips produced in China, causing major disruptions to the automotive industry. In response to ongoing diplomatic efforts, the Netherlands has suspended its intervention, but the dispute is not fully resolved, as a separate court case concerning alleged mismanagement is still active. The dispute underlines the fragility of the global supply chain, which relies heavily on Chinese component flows. In addition, and most importantly to my argument, this case shows how the interference of the U.S. capitalism over Europe, and more specifically, over the Dutch domestic and international policies, is negatively affecting Europe’s relationship with the Xi Jinping government. The current U.S. model of capitalism represents a threat to the multipolar world the Dutch government envisions, and a threat to FDI in the Netherlands. The U.S. intervention and subsequent Chinese export ban disrupted the supply chain of critical chips for the automotive industry, a crisis that the U.S. created and saw as an opportunity to exert economic pressure on China and Europe. Moreover, the inconsistent legal pretext the Dutch government used to nationalize Nexperia, shows how significant is the U.S. influence in Europe.
In conclusion, Europe, and most specifically to this case, the Dutch government, face a stark choice; become a casualty of US export controls or forge global neutrality toward the U.S. – Chinese conflict, shifting toward a role of strategic competitor.
CONCLUSIONS
FDI has always been considered as an inherent component and driver of global capitalism. However, the “Hyundai case” and the “Nexperia case” demonstrate that FDI have recently been driven by different factors, such as geopolitical factors. Political stability is a fundamental component of FDI. It creates a predictable and secure environment that reduces risks for investors. Investors focused on long-term investments are tempted to dissociate themselves from the historical idea of a capitalist system that prioritizes quick payouts to shareholders through dividends and stock buybacks. The survival of FDI in the U.S. depends in part on two factors: first the ability of its own government to prioritize long-term investments that would bring know-how and professional labor force. Second, on the U.S. government’s ability to outline a transparent approach to FDI. For instance, the American First Investment Policy remains unclear, and not fully implemented, creating uncertainty for investors. It is a rudimental attempt to use investment policies against the surging of a multipolar trade system.
Image article from Freepik