The facts on the Wall Street turmoil
September 16, 2008 | By Nathaniel Ward
Stocks plunged Monday with the news that two established investment banks were collapsing. Lehman Brothers declared bankruptcy and Merrill Lynch was purchased by Bank of America.
That this turmoil was managed through normal market processes and without a government bailout is the silver lining in the otherwise bad financial news, Heritage Foundation experts J.D. Foster and David John report.
"In our economic system, failed firms go bankrupt," they explain. "It's unfortunate, but necessary to future prosperity. In our system, firms are bought and sold as conditions warrant or necessitate. This, too, is normal and necessary for prosperity."
The failure of Lehman and Merrill Lynch reflects a turn away from government interventionism in the free enterprise economy, Foster and John continue.
"What is most important about these transactions is that markets are in one important sense returning to a normal order even in the face of uncertainty and turmoil: One firm filed for bankruptcy; another is sold; no direct government financial involvement."
This is the sort of "creative destruction" famously described by economist Joseph Schumpeter as inherent to free enterprise.
Unfortunately, Congress may resume its interventionist ways by bailing out Detroit automakers. Heritage's James Gattuso and Nick Loris report that Congress may give away $25 billion in taxpayer money to the auto industry as part of another "stimulus" package.
This bailout would be a bad idea and set a bad precedent, they argue. "The proposed bailout, however, would do little to solve the very real long-term problems of the U.S. automobile industry, which include not just fuel inefficiency but large retirement, health, and other costs. Meanwhile, American taxpayers would be left to pay the tab for years of bad business decisions by Detroit. And the cost is unlikely to end there. If Detroit receives a federal handout, more industries would come for their own dollop of aid."
Webcast Wednesday: Heritage to honor Robert George
The Heritage Foundation will honor conservative professor Robert George with its prestigious Salvatori Prize for American Citizenship on Wednesday.
You can watch the webcast of the ceremony on MyHeritage.org at 1:20 p.m. Eastern on Wednesday
George, who directs the James Madison Program in American Ideals and Institutions at Princeton University, is a member of the President's Council on Bioethics
The Salvatori Prize, named for entrepreneur and philanthropist Henry Salvatori, is given annually to Americans who uphold and advance the principles of the American Founding, embody the virtues of character and mind that animated America's Founders, and exemplify the spirit of independent and entrepreneurial citizenship in the United States.
Professor George on academic freedom
Thanks to a generous grant from the John Templeton Foundation, the American Spectator is publishing a ten-part series of articles on the components of individual liberty as it evolved in the West and the state of individual liberty in the future – not only in the West but in the rest of the world.
Princeton professor Robert George—who will be awarded Heritage's Salvatori prize on Wednesday—wrote the latest article in the series, a discussion of academic freedom and the liberal arts. The article appeared in the September, 2008 issue of the American Spectator.
» Download the article in PDF format
Other Heritage work of note
Protect America and Energy. Heritage Foundation President Ed Feulner and Vice President Mike Franc briefed more than 50 members of the House of Representatives on missile defense and energy issues during a retreat for conservative lawmakers on Monday. Heritage hosts these retreats regularly as part of its effort to educate members of Congress on conservative ideas. Previous retreats have focused on health care and a return to the principles of limited government. — David Talbot
First Principles. "Change" is a vague term, nearly a nonsense word, because of how candidates use it today, Professor Wilfred McClay said last Thursday at The Heritage Foundation. But it makes a handy political slogan, he said, because many people don't ask the important questions: Change what? To what? Why? Read more about Prof. McClay's remarks. — David Talbot
Ongoing Priorities. Just released from Heritage's office of Coalition Relations is Policy Experts 2008-2009: The Insider Guide to Public Policy Experts and Organizations. The new edition of Policy Experts lists over 2,500 people and 700 organizations in the U.S. and around the world who "understand and work for ideals that limit government, grow freedom, secure liberty, and protect families." You can order the book from Heritage's online bookstore or you can check out the searchable online version for free at the new-and-improved PolicyExperts.org. — David Talbot
Entitlements, Family and Religion. Speaking at Tuesday's Conservative Bloggers Briefing at The Heritage Foundation, Rep. John Kline (R-Minn.) explained his new online initiative to control wasteful spending, StopThePork.com, which he said enjoys the support of 50 other Congressmen. Another speaker at the weekly gathering of new media experts, Ericka Andersen, introduced a new online magazine, Culture11.com, dedicated to the proposition that America's culture is fundamentally conservative. The Conservative Bloggers Briefing is hosted by Rob Bluey, who directs Heritage's Center for Media and Public Policy. — David Talbot
In other news
- Congress is expected to vote Tuesday on a liberal-proposed plan for offshore drilling. But there's a catch: the bill would do little to expand domestic energy production, since it allows offshore exploration only beyond 50 miles. In addition, it would impose new limits on exploration within 50 miles that's allowed today.
- Gen. Ray Odierno, who helped execute the successful surge strategy in Iraq, has succeeded David Petraeus as commander of American and coalition forces.
- Because of a drop in energy prices, consumer prices fell in August.
- Pakistani troops are under orders to fire upon American soldiers that conduct raids into the country in pursuit of suspected terrorists.
Coming up at Heritage
To attend these or any other events at Heritage please RSVP at Heritage's website. Or you can view these events live online. All times are Eastern.
- On Thursday, September 18 at 5:00 p.m., Heritage scholar Lee Edwards hosts a screening of The Soviet Story, a documentary that tells the story of the Soviet regime and how the Soviet Union – an Allied power at the time – helped Nazi Germany instigate the Holocaust as well as the slaughter of its own people on an industrial scale.
- On Tuesday, October 21 at noon, author John Howard discusses his new book, Christianity: Lifeblood of America's Free Society.
Nathaniel Ward is the Editor of MyHeritage.org—a website for members and supporters of The Heritage Foundation. David Talbot contributed to this report.
