If there has ever been a constant in economic systems it would be that companies are always looking for ways to increase profit. One method of doing this is to invest capital into other countries and their markets through a process known as Foreign Direct Investment. Long has this revenue stream been heralded as the jump that a developing country’s economy needs to enter the world economic system. And so in accordance with this developing countries have readily accepted this capital. After all why shouldn’t they? Such a steady stream of income would be welcomed by anyone. In fact it had become so welcomed that it even became the choice capital flow for developing markets (Dadush, Dasgupta, and Ratha, 2000; and Lipsey, 2001). But is such unrestricted flow of capital across national borders such a good thing? Free flow capital is highly favored due to the propensity of that capital to diversify and bring back high rates of return. The question is who gets the biggest return? Not only does Foreign Direct Investment allow for capital to flow across international borders but it also allows human capital and technological gains to transcend borders as well. Foreign Direct Investment also increases the competition in the host country’s domestic market and boosts that country’s tax revenue through corporate income taxes. As stated above human capital, or the knowledge, skill, and training held by the people in a population, tends to rise when Foreign Direct Investment is being received. This is from foreign companies coming in and training the new workforce in methods and skills that the workforce may not have had access to otherwise. This training also brings about the flow of new technology into system by corporations bringing their production methods and ways to direct capital through a market. In addition this global flow can bring in better business practices from across the globe raising the labor conditions of workers in the country. If all of this sounds too good to be true then you’re more than likely correct. While this can and does happen in certain cases (Feldstein, 2000), there are a number of instances where the risks of these investments outweigh and even counter the benefits. A large problem is that a number of these investments are short term and used to test the waters of a developing market (Hausmann and Fernández-Arias, 2000). One of the drawbacks of short term lending like this is that they are based solely on speculations and not considerations of long term outcomes (hence why they are called short term investments). This short term lending can cause a market to experience a sudden loss of capital as it is growing which can lead to a sharp downward turn of the entire market. This in effect creates a cycle of loss on short term loans and investment due to the way in which these loans are considered. In contrast however a number of foreign investments are in fact bolted down to a country and cannot be withdrawn so quickly. This is due to the fact that with foreign investment comes foreign interference in the domestic market and surrounding area. Foreign companies may build factories and roads in an area. When a foreign market does decide to pull out of a country though, the effects are devastating. Many countries, like those in Africa, lack the infrastructure to properly maintain and care for the structures left behind by the company. Factories and roads rapidly deteriorate as do the environmental conditions in that area due to practices that the foreign company may have engaged in. Still when considering the other things that are brought in with Foreign Direct Investment this aspect should just become a tiny blip on a risk radar. This however is not the case when you carefully examine the “good” results of Foreign Direct Investment. As stated above, Foreign Direct Investment is supposed to increase the human capital in a region by bringing in training and new skills to the workforce in the host country. While this is true in some instances the actual practices put in place tell a far different story. When a foreign company or corporation comes to a developing one they seek out previously trained or already skilled workers in a process known as “skimming”. While the effect of Foreign Direct Investment is seen as positive in countries where the level of education is high (Borensztein, De Gregorio, and Lee 1998), the effect is far more negative when the host country has a fairly inequitable distribution of education (large separation of socio-economic classes). In those instances this skimming results in a net loss in human capital for the previously established domestic enterprises lowering their overall productivity and ability to compete. This leads to the next consequence which is the crowding out of domestic markets. By engaging in practices such as skimming coupled with an already strong and streamlined access to markets, foreign corporations can come into a developing country under the guise of Foreign Direct Investment and effectively crowd out all domestic competitors by making the market to competitive for them to be able to turn a profit. Of course this can also be written off by the governments of the countries receiving the investment due to their new revenue stream of corporate taxation. This is until the governments realize that their entire economic system is now dominated by foreign companies while their own domestic enterprises are struggling, or in the case of many countries when they realize that Foreign Direct Investment has become the number one source of capital flow in the country as stated previously. This total control of an economic system allows countries to set their own rules in the host country by using the threat of “Listen to us or we leave”. This hardball game of tug and war results in a weakening of the government’s power as a whole. This viewpoint is supported by research that demonstrates that when foreign markets were introduced to developing East Asian countries, the government’s power to control both their own domestic economic system and the direction of their domestic market structure was significantly diminished (Yueng 2014). This research points towards an ability to control the country that receives the highest share of Foreign Direct Investment through a combination of fear tactics and market domination. This should be of utmost concern for developing countries as it has been found that riskier markets are those that receive a greater influx of funding through Foreign Direct Investment (Hausmann and Fernández-Arias, 2000). Risk in this instance is measured by indicators such as a country’s sovereign debt credit ratings. So why would a risky market receive more investment? The answer is tied back to the previous statement of Foreign Direct Investment crowding out domestic markets. This process is much easier, and much more profitable, when the host country contains missing or inefficient markets. When investors find markets and countries such as this they are able to operate directly rather than through local markets, supply chains, or legal teams. This raises an important flag in terms of policy making according to a report by Albuquerque (Albuquerque, 2000).