Are Canadian Economists as Smart as Paul Krugman thinks?

Unfortunately Krugman’s hopes that the policy conversation in Canada is more enlightened than in the US is dashed once again. Here is the set-up which is lifted from the comments section over at WCI*:

Posted by: [JR] | September 10, 2010 at 06:44 PM

The problem with central banks just targeting inflation is that no-one is responsible for unemployment. The ethically critical task for economists is to figure out how to get the NAIRU down.

Posted by: Stephen Gordon | September 10, 2010 at 06:58 PM

Are you sure? Because there’s a really cheap and easy way to do that: abolish Employment Insurance and social assistance. Be careful of what you wish for.

OK lets leave JR’s confusion over the unemployment rate and the NAIRU to the side as even US senators botch it badly. Let us also leave the dubious scientific validity of the NAIRU to one side (the empirics are bad). Let us also refrain from mentioning that he sounds a lot like the shrill Niels Veldhuis of the Fraser Institute which Stephen has decried as not belonging to the evidence based community.

Stephen’s flippant response (and in perfect accord with the Fraser institute) is I suspect the widely held gut instinct of scientific liberals** (aka orthodox economists). But I think even here Stephen has transgressed the boundaries of the received wisdom and is attempting to push the argument further than can be sustained on its own terms–i.e. accepting the internal validity of its logic.

The supposed link between welfare, EI and the NAIRU is that IF replacement rates (the benefit paid out) are too high then unemployment will stay too high because workers will not accept jobs below their replacement rates. That is the micro mechanism. The macro-consequence is that prices (wages) will not stall or fall because the economy is already at a de-facto full employment rate. If replacement rates are left untouched and the government tries via fiscal policy or the central bank tries via monetary policy to stimulate the economy in an attempt to decrease the ‘”officially recorded” unemployment rate THEN they would simply increase inflation (and at an accelerating rate to boot if they kept stimulating) because they would essentially be stimulating a supply constrained economy (on the labour market side).

The NAIRU can thus be thought of as the Phantom Menace in this morality play: in which the abridged moral of the story, as is often the case, boils down to a cliché–the road to hell is paved with good intentions–trussed up in quasi-scientific garb (hey if the relationship is not stable and it fluctuates without major changes in the social protection legislation and despite increasing labour market flexibility then I am being REALLY charitable here).

I slightly digress. Let us come back to causation and replacement rates. The average welfare rate in Ontario is around 600$ and the average minimum wage job pays around, after taxes and deductions, 1100$ (assuming a 35hour work week). Which means that the replacement rate for welfare is about 55%, or near half the value of a minimum wage job. Employment insurance replacement rates are an equally dismal 55%.

There are thus two major flaws in Stephens extreme logic that “there’s a really cheap and easy way to do that [lower the NAIRU]: abolish Employment Insurance and social assistance.”

The micro foundations of the NAIRU rely on the relationship between the incentive to work and the incentive to idle. True, all things being equal if I could collect something close to my existing salary without actually having to work I would probably dedicate most of my time to strictly speaking over the short term non pecuniary pursuits. We might call it leisure or we might call it investment the proof of the pudding would be in the eating. That is another story. The point is 55% of my salary leaves me and I suspect most Canadians declaring bankruptcy if sustained for too long a time. The replacement rates are already so low as to make me willing to take any job at anything above 60% of my existing salary with the hopes of shopping-up when times get better. That implies massive flexibility which implies a hefty downward shift in the NAIRU.

Here is the analogue. Imagine the Bank of Canada is sets real interest rate at 0% (O.K. you do not need to imagine they are already there and have been for some time; negative in fact). So you are pushing on a string: your are out of ammo. Replacement rates work the same way. Once they have been pushed so low any further decreases deliver infinitesimally less effect on the NAIRU. Stephen forgets his ilk already won that war. But like a good soldier fighting the last war he needs to ring the bell again!

Fine, old wars and instincts die hard.

But here is the really shrill part of Stephens logic. Abolishing EI and welfare would not lower the NAIRU under present conditions. We are demand constrained. We only become supply constrained on the labour supply side of things if and only if according to accepted wisdom if high unemployment persists for too long: i.e., hysteresis kicks in (you know the idea that Wayne Gretzky forgets how to pass and shoot hockey pucks after a year).

Yep I am willing to swallow all that bullshit and I still can’t get to Gordon. Hey it is an inside job I am pulling here.

Re-focussed. If you killed EI and social assistance right now, the consequences would be devastating. Demand would plummet by the equivalent value of payments, business would register the defective demand through declining inventories and decreased investment and prices would begin a deflationary death dance. True the NAIRU would be heading south: -4 or 6%% anybody? BUT so what? The recorded unemployment rate would go to 14-20% and if we accept that skills are like lettuce those figures would become persistent and the tax base totally eroded. Now if Stephen Gordon thinks that is a cheap solution to the NAIRU then I can only conclude that he has joined the ranks of the, what was the phrase he used?, ohh yes: “not belonging to the evidence based community”

*The name of the innocent was changed to protect the innocent.
**Take a political theory course if you do not know what a liberal in the political theory or original sense of the word means.

Quebec Budget Take 2: More Regressive than Progressive

In my last post on the Quebec Budget I was in error when calculating the threshold at which the budget became regressive for the working poor. Specifically I set the threshold two low. Instead of 25,000$ for a working family of four it should have been set at 30,345.

Also I should have included a definition of working poor. While most poverty measures are considerably higher I will define working poor as anyone earning the minimum wage or less. In Quebec the minimum wage is around 18,000$. Thus a family of four with two working adults making $36,000 or less is defined here as working poor.

Also there are two issues here: the degree of progressiveness in taxation and the degree of poverty alleviation or (cash transfers). The first is metric of who pays and how much as a share of their income and the second is how much is redistributed. Consumption taxes such as gasoline and sales taxes, user fees, and health premiums are examples of regressive taxes. The regressiveness of these tax measures can be partially, totally, or more than offset by redistribution in terms of transfers (cash or tax credits). Moreover as my initial post noted the gasoline tax will presumably have beneficial externalities if and only if it drives down gasoline consumption and or increases public transit efficiency and infrastructure.

Ok so enough with the preamble: The Quebec budget is both progressive and regressive for the working poor and it almost entirely comes down to the health premium and the fact that it is not a function of income accept at the lowest income levels where the 200$ premium will not be charged. If you click on the PDFQuebec Budget you will see that I have reproduced table 36 and 38 of the budget document with two estimates included: for a family of four with two working adults @ 31,000$ a year and for a single working individual @ 15,000$ a year (both in bold).

One of things that jumps out is just how sneaky the government was in using 10,000$ wage increments. For a family of two it made it look as though it was only @ 40,000$ the health premium kicked-in and for a single individual @ 20,000. But as table 30 of the original budget document indicates the health premium kicks in 30,345 for a family of four and just under 15,000$ for a single individual.

If we then do the workout for as I have done in the estimates made in the PDFQuebec Budget”> it becomes clear that for working families making below the 30,000 threshold the budget is seemingly mildly progressive to the tune of 145$. But a family of four making 31,000$ is made 155$ worse off. So what is happening here is that the working poor are subsidising other members of the working poor. That is an odd way of defining a budget as progressive and to say the least a very odd definition of redistribution. Single poor people are even worse off. A single individual making 15,000$ a year is made 83$ worse off and @10,000$ a year 149$ better off.

The other sneaky thing in the budget tables is that they divide the Solidarity Tax Credit (QSTC) by the number of taxpayers not by the number of individuals in the house. To see why this matters consider the column “compensation per individual.” So a family of four below just below the $30,345 cut off will be made only 37$ better-off per individual member of the household.

But the real point is this the budget is regressive for some members of the working poor and progressive for others. At this is even more the case if one factors in the hydro increases which the minister claims will be offset for poor households via the QSTC. Both the scheduled and then budget + increases to hydro amounts to 70$ a year for an average household. so that means the model family of four at the just below the $30,345 cut off will see only be 80$ better off or 6.66$ a month better off.

Now I am not an expert on poverty but I do know the 6.66 a month, less than 2$ per household member, is hardly a poverty alleviator. Moreover the QSTC is not inflation indexed until 2013 so we can claw-back another 6 to 9% in terms of real purchasing power. That too goes against the claim made in the budget that the Quebec government is maintaining the income of poor quebecoise.

Mankiw and ignoble GDP growth fictions

A great example of arguing from theory rather than fact. Is there any robust proof this is true? Not really, next to none. Clinton raised taxes and growth was higher than before he increased taxes. And the post war record of increasing taxes and robust growth suggest something else is going on then dreamt up by Mankiw. Anyway it must be nice to never have to check in with the facts and just read-off from the holy-writ. At this point Pravda was more enlightening…at least they tried to warp the facts to fit the line. Apparently the conservative wing of liberal economics is now both value and fact free.

Second, the Fed could easily overestimate the economy’s potential growth. In light of the large fiscal imbalance over which Mr. Obama is presiding, it’s a good bet he will end up raising taxes for most Americans in coming years. Higher tax rates mean reduced work incentives and lower potential output. If the Fed fails to account for this change, it could try to promote more growth than the economy can sustain, causing inflation to rise (bold added).

Projecting the future of fiscal and (not) monetary policy

While some are predicting more of the same in terms of monetary and fiscal policy I suspect a couple changes are in the pipe at least vis-a-vis fiscal policy. Monetary policy is foggy: there are just too many what ifs floating around. In terms of fiscal policy I think short term 1-2 years we will simply wallow along with the old paradigm. It will take awhile to figure out that there is simply not much fat that can be cut from the budget and most program spending is already at politically minimal levels. So tax policy is eventually going to be all the rage. The direction of that conversation will partly be determined by what happens in the US both because our political conversation tends to follow not lead that in the US and because of the implied tax space that will I think be created by increasing corporate and personal income taxes in the US. Sooner than later, the US is simply going to have to pay for two imperial wars, and a serious structural deficit in terms of their trade and fiscal balance. All three point in the direction of higher profit, income and consumption taxes. Further, the long term trend income inequality in the US would seem to point in the direction of a high income surtax or more exactly a more not less progressive income tax regime. That might be 5 years out in Canada but I do think it is coming.

Hence medium to long term I suspect those conservatives who think we are simply going to pick-up where we left off before the crisis are going to find themselves where the pseudo Keynesians were circa the 70s: in a state of lament with no a discredited policy paradigm going forward.

The War on EI reform Commeth

Conservative economists are up in arms that anyone could suggest lowering the qualification requirements for workers wanting to access an insurance program they are obliged to contribute but for which they do not necessarily have access.

Case in point, Stephen Gordon an economist at Laval was interviewed on CBC and he had the temerity to assert that the opposition parties were purporting to return Canadians to the dark days of UI dependency where workers worked 10 weeks and then took a “vacation” (10-42 which he admits was a small group of “users”).   An honest look at the previous programme would conclude that although there was a small user base of “bilkers” the other group was more a victim of a defunct east coast growth paradigm, entrenched rural local business interests and governments bereft of vision (with some irony what we might call an “industrial policy” the very thing conservative economists hate).  It would in fact take the complete collapse of the fishery to provoke a fundamental rethink of the structural dependence by design aspect of the old UI system. Apparently this is wrong.  They still have not yet arrived at areal solution for the structural dependence on the EI program.

But all of this is beside the point.  No one in the opposition is suggesting a return to UI as a guaranteed income scheme.  Although I do not know why this should disturb a conservative economist?  Conservative economists tend to love programs which enforce some requirement to work.  Let us call this their Victorian vice.  Indeed the reason conservative economists like the WITB is because it gives an incentive to welfare recipients an incentive to work.  It is therefore somewhat perverse that they should prefer to exclude formally employed workers from the EI system so that they can go on welfare and then be incentivised to work through programs like the WITB.  In a bizarre twist during the interview Gordon suggested that while access to the program (which all workers are forced to contribute) should remain restricted those who do qualify should have their benefits increased!  A new moral milestone: not only a distinction between the deserving poor but a distinction of merit between deserving and undeserving workers:  All enough to make a good Victorian blush at the recognition of their Dickensonian sentiments.

But I digress.  Gordon even went further and conceded that relaxing the qualifying criteria would only benefit 2% more of the unemployed.  He went further to say that there were other ways to help the poor: such as beef up the GST rebate.  For a man who does not receive the GST rebate and is woefully ignorant of how much income replacement it would represent it was not only callous it was disingenuous.  It was disingenuous because Mr. Gordon knows full well the EI system should be well funded requiring no draws on general revenue. It was only a fleecing of the program which moved billions from the program to general revenue that voila the program needed extra funding.  As an aside, this is why the finance minister’s suggestion the increased EI payments are partly to blame for the increased deficit ring hollow.  It was that minister who raided EI to make room for his silly tax cuts.

But the point is this, there is no choice between increasing benefits or increasing eligibility if we make an honest accounting of how large the surplus was in the EI fund.  Similarly it is a false choice between beefing up the GST credit or the WITB program or extending eligibility.  The EI fund should be fat; it was raided to pay for silly tax cuts that even the economist in question wrote a long blog post against.  It is therefore disingenuous to turn around and make it a question of where money is best spent.  EI is paid for by employers and employees, the fund was fat, and it was depleted by a raid on what appeared to be its fat in good times.  In short, the trade off can only be posed if one accepts the hanky panky involved in the raiding of the EI fund.

The left and Cash Transfers to the Poor: A Rejoinder to Slander

This seems so elementary that it should not have to be pointed out. Lately it has not been in my nature to get in the way of an over the top, gross generalization founded on spurious sampling techniques paired with the terrorism of gotcha journalism, however, today I am feeling frisky.

Some Guy (SG) has a blog post up about how lefties hate direct cash transfers to the poor. I can’t make heads or tails of this claim including the two random citations of lefties provided: one an individual the other a think tank (now there is rigour if I ever saw it). Unfortunately even the random citations provided were poor choice because in the one case SG failed to read the article—I suspect he is hoping you will too.

But alas we all now know that economists are to be debated not trusted. Inter alia, Duncan Cameron argued for an increase in direct cash transfers to the working, unemployed and non working poor:

“By any measure, minimum wages, welfare payments, unemployment assistance have all declined since at least the inflationary period of the 1970s. All these programs need dramatic improvements.”

There is then some irony that SG should have given his post the title: “An overlooked anti-poverty strategy: giving money to poor people.” Seemingly for SG, an increase in the cash benefits to the poor, working poor and unemployed do not quality as “giving money to the poor” (I will explain why below). And unintended irony of all irony the research reported on SG”s blog on minimum wages concludes that increases in minimum wages under a 40-45% of an average hourly wages threshold has little to a positive effect on employment. Although having an indeterminate effect on poverty.

Hence, I suppose the need for direct cash transfers of one form or another. Like uhm maybe an increase in cash benefits for welfare and EI recipients as Duncan argued? No No No No! Shrieked the vanilla economist! I will explain why further on.

In order to solve this murder mystery we will have to return to the scene of the crime. What seems to have stuck in the quick of SG was this offending remark by Duncan on EITCs as a generalized strategy for poverty reduction:

“Not even the Toronto Star editorial board seems to have noticed the problem is much wider than the working poor, and the solution greater than an earned income tax credit — aka a handout — so that lousy employers can continue to pay poverty wages.”

Clearly EITCs are SG’s preferred poverty reduction strategy—no matter that EITC’s do not have robust evidence to support the claim that they reduce poverty. In the US for example, where the program is much more robust than in Canada, the maximum benefit is around 2,700$ per year for a family with two children and around 500$ for a family without kids. And here is the kicker the EITC is phased out fully at 37,000$ for a two child two working parent family and 24,000$ for two individual no children family. I find some irony in the fact that my middle class baby manual tells me that children cost around 10,000$ a year. Therefore the idea that a 1,300$ (max) a year per child EITC in the US could be held up as major strategy to combat poverty is well simply farcical—albeit better than a kick in the ass I suppose. In any case, this is clearly where the unintended irony of a virgin gives way to self-satirisation—hardly edifying.

But the more important question is why would an economist be flogging EITCs as (a) the only form direct cash transfers should take; and (b), at the same time misrepresent the scheme as a poverty reduction scheme? The second is easier (i.e., more simple) to explain than the first. Classic misdirection—the first learned trick of magicians, pick pockets and con-artists (all of which I have infinite respect for outside of the academy).

However, the first question is more painfully answered. You see back in some early graduate seminar vanilla economists (well actually all economists because all economists have to be able to converse with vanilla economists but the reverse is not true—although some vanilla economist are capable of cross paradigm conversations) are given a tutorial on welfare policy analysis. The problem is that traditional cash transfers from say welfare or EI create an incentive for poor people not to work. All things being equal, why work if your welfare benefits will be clawed back and your earned income will be taxed? The basic thrust of the EITC is that it makes it so that work pays. And this is the real thrust of the EITC—making sure the incentive structure is designed so that the poor have an incentive to work and not layabout on the dole. It is about getting people off of welfare—which may or may not be a good thing—but it is not about poverty alleviation.

As an aside it was this I think Duncan was reacting to. Somewhat perversely, EITC’s act as a subsidy to minimum wage employers in two ways. On the one hand, they increase the labour supply of minimum wage workers thereby ensuring increased slack in their labour markets and thus downward pressure on average minimum wages. And on the other hand, they provide a subsidy to employers because the tax credit mitigates workers demand for higher wages. Perhaps this is why the program enjoys such bi-partisan support in the US.

In sum, EITCs are politically palatable because they “reward hard work” and shun the welfare system while giving the appearance of a concern about poverty. they keep in tact and rejuvenate that old Victorian separation between deserving and undeserving poor (never mind that the welfare system already reproduces this logic through extensive monitoring and what has been over the last twenty years increasing paltry benefit rates with increasingly restrictive qualification criteria).  They are, if taken in isolation as the only tool, a politically expedient, ideologically driven, and an ineffective poverty alleviation strategy sometimes garbed up in progressive rhetoric.

I welcome an honest conversation about a robust poverty alleviation strategy for Canada.  If only vanilla economists would try to meaningfully participate by jettisoning their predetermined policy preferences and erroneous characterizations of other members of the policy community. I for one am ready for a new conversation on poverty reduction in which everything is on the table–and not just facile ideological preferences masquerading as the new true social science.

Open Thread: Unemployment and Fiscal Policy

Delong is Wrong Again

What is up with Brad Delong?  It is like he is itching for a job in the Obama administration.  By his own admission he is no macro-economist but surely he knows the difference between effective demand at the level of the grass roots and supply push.  Then again maybe he is a macro-economists…of the fresh water variety.  Just read the following:

Even after central banks have pushed government bond prices as high as they can go, they should keep buying government bonds for cash, in the hope that people whose pockets are full of cash will spend more of it, and that this will directly pull people out of joblessness and into employment.

Here is a rather old fashioned idea: temporarily beef-up both the number of those covered by UI and the level of the replacement wage so that unemployed workers will have cash to spend on things like mortgages, rents, food and transportation.  Surely this seems better than hoping those who already have pockets full of cash will spend more of it and pull people out of employment.  And while unemployed workers are spending their UI, the Obama administration can find a little bit of breathing room to come up with a coherent plan to the financial mess instead of playing hanky panky ad hocery with the Fed, the Treasury and Wall street.

Dude trickle down is so like…the eighties.

Unemployment and recovery: debating the future

A conversation over at PEF, instigated by Jim Stanford’s modeling exercise with respect to what the future holds for unemployment, prompted me to put down some of my thoughts about the future path of economic growth. On commentator suggested that the Jim’s numbers were too pessimistic based on the experience of the past two recessions. I argue the past recessions will not be a useful guide and here is why:

Three years forward and it is anyones guess what monetary policy is going to be and a strong case can be made that some form of restraint will be in the works whether in monetary or fiscal form. I don’t think the last recessions are going to be a very good guide to, or even educated guess about what, we can expect over the next three to five years. I would make the following seven conjectures.

1) There is not any  post-NAFTA bounce this time around, either in terms of the optimism it generated in investors’ expectations or in the “easy” forms of continental rationalization it made possible.

2) The US is going into major deficits these will have to be paid for through some form of restraint –higher interest rates plus higher taxes and or spending cuts. So hard to see a Clintonite gilded age of surpluses along side of tax cuts. Much the same this side of the border although more muted.

3) The bubble was a financial bubble not simply confined to housing or the US. It was that bubble that generated the fantastic growth numbers that brought structural unemployment down towards, but never reaching, post WWII golden age averages. That bubble also generated the terrific commodity price boom through several linkages.

4) The bursting of the bubble undermined the faith in high degrees of leverage. It was that leverage which enabled the neoliberal consumption miracle.

5) Mainstream economists may still have faith in the “efficiency” (not in the tautological sense of the EFMH) of financial markets. But it is going to be a long time before that degree of faith is restored in investors’ eyes and even then it is hard to imagine a repeat of the heady days of 2001-2006/7 in our life-time.

6) Insofar as this is shaping up to be a generalized (international) recession, the spatial and temporal dynamics are going to be very different. It is not going to be possible to play the game of export to the hot demand zone. We are going to be trying to export our way to growth. There is a compositional fallacy involved here.  This will either degenerate into a beggar-thy-neighbor game or its opposite which is not a positive sum game either. Rather, it is a cut throat competition game played-out in putatively “free” markets

7) Policy makers on both sides of the line are looking for one-off spending programs which deliver fiscal stimulus that has the following exotic properties: (a) to stimulate the economy over the short-term with no medium to long term liabilities in terms of taxes or debt i.e., which do not permanently alter the weight of the state in the economy; (b) which preserves jobs and (c) which lays the foundation for a future round of growth based on high productivity. I would like to be 7 feet tall and I wish them the best of luck in their endeavors.

Taking 1-7 together we get a recipe for the more somber form of neoliberal macroeconomic policy where the costs of adjustment are forced onto subordinate classes sans the prospect of an eventual orgy of consumption to wash the pain away.

Put less colorfully, the future looks more demand and supply constrained than the past and the current ideological policy fashion is still fascinated with last seasons dogma.

In a nut shell Jim’s numbers just might be too optimistic.

From Despotism to Hegemony and Round-again to Hegemonic Despotism: Burawoy’s Neoliberal premonition

Michaels Burawoy’s the Politics of Production (1985), stands out as an important contribution to Marxist political economy in general and in particular Marxist analyses of the dynamic interaction between welfare state institutions, the juridical regulation of industrial relations, and the labour process.  Inter alia, Burawoy set himself the task of developing an analysis of the “politics of production which aim[ed] to undo the compartmentalization of production and politics by linking the organization of work to the state” (p.122).  Burawoy used the dynamic interaction between labour market, welfare state, and managerial regimes to generate a typology of labour relations regimes.   Specifically he argued that “the process of production is not confined to the labour process… It also includes political apparatuses which reproduce those relations of the labour process through the regulation of struggles.  I call these struggles the politics of production or simply production politics” (Ibid: italics in original).

Burawoy argued that for classical Marxist political economy it was simply assumed that the naked coercion of the labour capital relation; i.e., that the dependence of workers on wage labour for its existence and reproduction through time was sufficient to bind workers to capital and by extension to the arbitrary authority of management. It is the latter which Burawoy labels as market despotism, wherein “the anarchy of the labour market is replaced by despotism in the factory.”  While Burawoy argues this characterization of labour relations regimes was historically correct for sectors such as the New England mills after the 1860s or in the contemporary agricultural sector of the US, it does not capture the essential dynamics of post-WWII labour relations regimes in much of the advanced capitalist zone.

For Burawoy two kinds of state intervention caused a decisive break with “the ties binding the reproduction of labour power to productive activity in the workplace” (p.125).  The first of which being the development of the welfare state and its associative institutions which put an implicit floor on wages and the second being state intervention directly in the relations of production via industrial and labour relations laws which severely restricted the arbitrary exercise of authority by management.  Burawoy concluded from the above therefore that:

…management [could] no longer rely entirely on the economic whip of the market…..Workers must be persuaded to cooperate with management…..The generic character of the factory regime is therefore determined independently of the form of the labour process and competitive pressures among firms.  It is determined by the dependence of workers’ livelihood on wage employment and the tying of the latter to performance in the workplace.  State social insurance reduces the first dependence, while labour legislation reduces the second (p.126).

It was this dynamic of negotiated internal consent over the labour process and the incomplete external alienation of labour from the means of subsistence owing to the provision of a social minimum wage by the state that Burawoy designated as a “hegemonic regime.”

Yet, by the early nineteen eighties Burawoy began to see a new emergent dynamic arising in the advanced capitalist zone which he described as hegemonic despotism.

The new despotism is founded on the basis of the hegemonic regime it is replacing.  It is in fact hegemonic despotism.  The interests and capital and labour continue to be concretely coordinated, but where labour used to be granted concessions on the basis of the expansion of profits, it no w makes concessions on the basis of the relative profitability of one capitalist vis-à-vis another – that is, the opportunity costs of capital.  The primary point of reference is no longer the firm’s success from one year to the next; instead it is the rate of profit that be earned elsewhere (p.150. Italics in original, emphasis added).

Here Burawoy, although without the benefit hindsight and without calling it as such, was describing one of the central characteristics of neoliberalism; namely, the increasing international competition between capitals and the increased mobility of capital relative to wage labour.  Further Burawoy identified a key shift in the way in which the relative failure or success of capitalist firms was being evaluated—according to the opportunity costs of capital.