Darwin was a Capitalist

Allowing Lehman to fail was perhaps the smartest thing Hank Paulson has done this year. Like other investment banks, Lehman was highly leveraged and had gorged itself on toxic assets. When any firm is leveraged at 30 to 1 and asset values drop, they quickly become insolvent. And insolvency, if you were wondering, is not good.

Blame is easy to spread around, and excuses come cheap in Washington. Maybe FAS 157 is the culprit, banking regulations were too weak; perhaps aliens interfered. The point of the matter is that poorly-run businesses need to fail.

Fast forward a few months and we have $700 billion sitting at Hank’s fingertips. They call it the Troubled Asset Relief Program, or TARP. That money may be able to free up the credit markets, revive the economy, and save the world – but only time will tell.

Eager to exploit the benevolence of American taxpayers, Detroit auto executives are now sprinting, palms-outstretched, to Washington with hopes to claim some of the TARP funding. Detroit, by the way, is home to General Motors, Ford, and Chrysler.

While the financial crisis undoubtedly has affected American automakers, their issues go far beyond credit and the economy, and taxpayers should be concerned by any political movement to place Detroit on welfare.

Congress passed a $25 billion loan package for automakers in September; apparently that wasn’t enough. Now Democrats are working to grant another $25 billion of aid for the “Big Three.” But throwing money at our auto industry is not a solution.

Regardless how the economy is doing, General Motors cannot stay competitive. Their stock, for example, has been in decline for the past eight years. The sad truth is that our auto industry is crippled.

Detroit automakers have allowed unions too much power. And perpetuated by misguided government policies, unions workers have strangled their employers to the point of extinction.

Should the government step in to save this ailing industry? No, unfortunately it's too late. The course of evolution requires that Detroit become part of history. New companies have evolved - stronger and better equipped for the 21st century.

As Darwin would say, it's natural selection. "Survival of the fittest." Let capital be efficient, let the markets adjust our economy. It's going to happen, eventually.