Like Robert Caro before he wrote the The Power Broker, many of
us hold to the anachronistic idea that “power in a democracy
comes from the ballot box.” Not Greg Mankiw, though. For him, a
federalist democracy is all about state and local governments
competing with one another and corporations voting “with their
feet.” Because capital is more mobile than labor, competition
among governments significantly constrains how capital is taxed.
Corporations benefit from various government services, including
infrastructure, the protection of property rights and the
enforcement of contracts. But if taxes vastly exceed these
benefits, businesses can — and often do — move to places
offering a better mix of taxes and services. Add to capital’s
ability to play one government off against another the fact
that, as a result of the Citizens United decision, corporations
can purchase both politicians and elections. What we end up with
is neoclassical economists’ conception of a perfect democracy.