The paper discusses the impact of high capital mobility for monetary and budget policy as well as for the Provision of public goods, for taxation, for wage policy and trade unions, for distribution policy, and for social security Systems. The mobility of porrfolio capital puts additional restraints on monetary and fiscal policy of governments, the mobility of real capital restricts the maneuvering space of governments (in redefining the opportunity costs of government decisions in open economies). It is shown that competition between governments does not degenerate but serves as a mechanism to reduce costs and to discover new institutional arrangements.