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.
I suspect what people like Mankiw are trying to say, but don’t quite feel comfortable saying openly, is that the “democratic capitalism” chimera is over. That maybe once it was important to foster this myth; but, in the end, they did not really mean it.
That’s why they need to come up with new stories. The one Mankiw came up with is that corporations vote with their feet and we (that is, everybody else, except for him, his pals, sponsors and such) must put up with it and compete among ourselves for the honour of making them happy and comfy.
You know, there is no other way; we must understand and be realistic. They are just impartial, objective scientists, we are only cannon fodder.
Other deep thinkers, much like Mankiw, faced with similar problems propose different solutions. In Oz, they came up with the Democratic Oligarch: one gaziolionaire has too much power? No problem. We need more gazilionaires, because some of them are bound to be good guys, who will invariably oppose the bad guys! Believe it or not!