FDI can be good when there is technology transfers

https://www.counterpunch.org/2023/07/21/why-capitalism-is-leaving-the-us-in-search-of-profit/

Second, unlike many other poor countries, China possessed the ideology and organization to make sure that investments made by capitalists served China’s own development plan and economic strategy. China required the sharing of incoming capitalists’ advanced technologies (in exchange for those capitalists’ access to low-wage Chinese labor and rapidly expanding Chinese markets). The capitalists entering the Beijing markets were also required to facilitate partnerships between Chinese producers and distribution channels in their home countries. China’s strategy to prioritize exports meant that it needed to secure access to distribution systems (and thus distribution networks controlled by capitalists) in its targeted markets. Mutually profitable partnerships developed between China and global distributors such as Walmart.

So what would you say to someone who says that global capitalism is good because it helps develop countries by direct investment?

I would politely but insistently ask them for examples of which countries capitalism developed. Specifically.

John Smith covers this in Imperialism in the Twenty-First Century. I haven't read the book in a while, but the tl;dr is that FDI mostly go to factories and other parts of the production process owned by transnational corporations based within the imperial core, so the Global South country doesn't benefit from the investment. If most of the FDI goes to sweatshops that exclusively makes cheap T-shirts that will be sold in Walmart stores, then that obviously wouldn't benefit the host country. It's not a real investment for the host country but a subsidy for Walmart since Walmart controls the sweatshops. This is how neoliberalism's austerity fits into this. The FDI goes to the country and since everything is privatized, the money goes to a bunch of private enterprises and through the Global South country's relationship of dependence with the imperial core, those private enterprises are connected to transnational corporations.

China avoided this trap because their government actually has control over capital, the Deng reforms stipulated that FDI has to come with knowledge transfer, and Mao's efforts towards educating the previously uneducated peasantry meant there was a huge reservoir of workers who could be trained to put the knowledge transfer into good use. I think China having a huge domestic market also plays into this.

So, you had sweatshops in China, but because transnational corporation wanted to take advantage of Chinese workers' potential as skilled labor, they also started to build factories that cater towards commodities higher in the production process, so things like car parts and smartphone parts. But with the knowledge transfer and practical experience in creating those commodities, factories higher in the production process but aimed towards the domestic market also started to be build. This means the FDI that went towards those initial factories actually are an investment. However, it's not the actual dollar amount, but the knowledge transfer and opportunity to put that knowledge transfer into practice that is the real investment.

At the same time, labor arbitrage within imperial core countries meant those countries face deindustrialization. The sweatshops get exported into the Global South, but since Chinese workers are cheaper than Western workers, those factories that turn intermediate commodities into the final product (I'm blanking on the proper term) are also outsourced to China. The end result is Global South countries dig up the raw resources, refine it, and turn it into intermediates, China further modifies the intermediates and assembles those intermediates into a final product, and the US wraps the final product with a plastic wrap and slaps a "made in USA" sticker on it. But being so isolated from the production process as well as the complete financialization of the economy meant the Western countries lose practical experience in manufacturing.

I mean yeah sure in can be good if you consider sweatshops and overcrowded cities full of unemployed people good

When ever liberals bring up these bullshit arguments, always point out the property relations involved and who owns what, direct investment is not going to the average citizen in any given country, it goes to ruthless industrialists or corrupt business politicians who use the cash to more efficiently drain resources and surplus value from the population and sell it back to the west for a vacation home in Europe or the US

The hint is right there in the name, Foreign Direct Investment, the west expects a return on the loan, i.e. they want profit and you don't generate profit by raising the standard of living of third world citizens

China is unique, which is why the vast majority of global prosperity and poverty reduction over the last 40 years in solely bound up in Chinese economic expansion, the hump on the famous elephant graph is all China