Article Published in the Pittsburgh Tribune-Review
As the President’s Commission on the U.S. Postal Service is looking for solutions to the agency’s financial nosedive, it ought to reach out and grab the hand brake of privatization. Without it, they are left with fire-break reforms that won’t cause the necessary long-term changes that powerful market forces will bring. As many other countries have already realized, taking away the post office’s monopoly and turning it into a real business are the most effective and potent options available.
Postal liberalization has happened in New Zealand, where stamp prices went down, in Australia, where on-time delivery went up, in Sweden, where there’s competition even in remote hinterlands, and in Germany where Deutsche Post is taking advantage of globalization and expanding into international markets.
There is no good reason why the U.S. government has to run the post office. It’s not the Army. It’s not the police. It’s an old fashioned way of sending e-mail. And it’s barely that anymore. A recent Postal Service study says personal letters make up just 5.6% of our mail. Advertising/junk mail, however, is almost 60% – does this remind you of your email inbox? As the privatized Deutsche Post has shown, the U.S. Postal Service could do much better than being a multi-billion dollar ad agency.
Service may have improved over the past 30 years, but the Postal Service is $11 billion in debt and is seeing decreased demand for money-making first-class mail thanks to fantastic technological innovations from the private sector. It has invested heavily in automation, yet struggles to improve efficiency, can’t seem to reduce labor costs, and doesn’t capture potential savings from bulk mail discounts.
The post office has acknowledged its problems, issuing a Transition Plan saying, “[We will] improve value to our customers, enhance operational efficiency, and foster a more performance-driven culture.” In other words, it wants to run like a business. But divine new business plans and improved management schemes won’t make it a business any more than having a “business model”, adding “CEO” to the Postmaster General’s title and switching from USPS.GOV to USPS.COM has in the past.
This sort of fiddling around the edges fails to get at the core problem-that the Postal Service is a government entity. It will only be a business and operate like a business when it faces the possibility of going out of business. It will be a business and perform like a business when owners and employees gain when the post office does well and suffer when it does poorly. It will be a business and act like a business when it celebrates serving 1.7 million new addresses every year, instead of equating customer growth with financial problems. Bureaucratic reform can’t make this happen. But competition and the removal of its monopoly can.
There are fears that a competitive system of private companies won’t deliver to rural areas. But the Postal Rate Commission itself found loss-making rural routes constitute “only 2.5 percent of all addresses served.” Serving these routes results in a loss of just $121 million or .3% of expenditures. New tax revenue gushing in from the formerly tax-free $65 billion mail industry would easily cover any subsidies needed to make such deliveries at the going urban commercial rate.
Former Postmaster General William J. Henderson said, “We will lose this monopoly. It’s happening all over the world.” The president of the American Postal Workers Union called the Commission “a thinly veiled attempt to dismantle the Postal Service as we know it.”
Let’s hope they’re both right.
Max Pappas is adjunct fellow at the Lexington Institute in Arlington, VA.
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