Could A.T. &T Run the Post Ofice?
OCTOBER 01, 1962 by MELVIN D. BARGER
Mr. Barger is a public relations representative in
"Custom has so strongly
imbedded the monopoly myth in our minds
that the mere suggestion of a private
postal system seems incongruous."
It is probably one of the miracles of the past half-century that the giant American Telephone and Telegraph Company has escaped direct government ownership.
It is miraculous because such a tidal wave of printed and spoken propaganda has been produced in criticism of the mighty telecommunications firm, while oncoming generations of future leaders have been carefully taught by their economics and political science instructors to be fundamentally suspicious of A. T. & T. and other privately-owned utility monopolies.
Also, many people have been conditioned to oppose and fear "bigness" in privately-owned enterprise, and of course, A.T. & T. is indeed "bigness." Also, there is substantial support throughout the country for the view that "natural" monopolies ought to be publicly owned.
Finally, almost every advanced nation in the Western world has a government-owned and operated telecommunications system, with the exception of large systems in
Yet 1962 finds A. T. & T. safely in private hands, though tightly regulated by the F.C.C. and numerous state commissions.
But an even greater miracle is that few people of influence have ever argued for private ownership and operation of the U.S. Post Office. Perhaps many people assume that a private postal system is impossible. Others may believe it is impractical. And some may even think it is unpatriotic. Yet there have been many times when persistent men have argued with success against ideas which were generally assumed to be impossible, impractical, or unpatriotic. Why have so few done so in the case of the Post Office? Since it is intellectually respectable to argue for a government takeover of telecommunications services, why hasn’t it been just as respectable to argue for an opposite viewpoint—say, for example, a private takeover of certain faltering government businesses?
The Postal Crisis
Such a faltering business is the U. S. Post Office Department, which drifts from one crisis to another without apparently finding the roots of its problems. There has been mounting criticism of its operations in recent years. "The American public and American business have been paying higher and higher prices for worse and worse postal service," said the trade magazine Advertising Age in May 1960, in a critical editorial opposing further rate increases. Reader’s Digest published an article in May 1957 entitled "Our Horse and Buggy Mails," with another the following year significantly called "How To End Our Post Office Mess Permanently."3 And Newsweek, in a special national report in the
A. T. & T.’s Continuing Success
In sharp contrast with the Post Office’s dimming image is the Bell System, whose corporate parent is The American Telephone and Telegraph Company. It has been attacked as an over powerful monopoly, threatened with punitive legislation, subjected to rigid controls, and regularly scrutinized by state and federal agencies. But for all the stumbling blocks strewn in its path, A.T. & T. has consistently provided the finest telephone service in the world, a fact that even its statist-minded critics freely concede.4 Ironically, though a profit-making corporation, its service record has greatly surpassed that of the Post Office, which has often excused its deficits on the grounds that its purpose is public service rather than profits.
The Bell System had a humble origin shortly after the first patents were issued to Alexander Graham Bell in 1876 and 1877, and has since become the colossus of American public utilities. A. T. & T. has assets of $21.7 billion, employs 750 thousand persons, and has 63 million telephone installations:, Although the country is peppered with small independent telephone companies and subsidiaries of the substantial General Telephone and Electronics Corporation, A. T. & T. commands the industry with all but 16 per cent of domestic telephone installations. And by possessing a complex nationwide network of interconnecting telephone lines, A.T. & T. has a part in all but a very small percentage of all long distance calls.
A Management Genius
The pattern for success was established early in the Bell System’s history by Theodore N. Vail, one of the company’s early founders who headed the corporation in its infancy, dropped out for a time, and returned in 1907 to push A.T. & T. toward its present level of greatness. Vail had been a railway mail supervisor before stepping into the fledgling telephone business, and was apparently the first man to have thought of having railway mail clerks sort the mail on trains so that it could be distributed to the post offices with a minimum of handling. A management genius who probably could have succeeded in almost any business, Vail had a special dedication to A. T. & T., and was probably chiefly responsible for the fact that the company never passed into government hands even though telecommunications systems the world over were being nationalized.
Vail recognized as early as 1909 that pressures for government ownership were soon to arise. In 1912 telecommunications systems in
Four decades after Vail, the case was never better for his belief that he could build a service vastly superior to the world’s nationalized systems. A.T. & T. today has a great depth of talented management, sound organizational procedures, almost unmatched technical personnel, and comfortable reservoirs of financial strength. While we take most of its services for granted, a little thought about the Bell System would reveal that not only has it "kept up" with the progress of the economic environment in which it operates, but it has also spearheaded much of that progress. A large amount of today’s business and government affairs is handled smoothly and quickly because the Bell System had the technical ability to create faster long distance services and such improvements as direct distance dialing, wide area telephone services, teletype equipment, and CENTREX systems (permitting dialing to and from extension phones in large organizations). It would be almost intolerable to imagine the state of our present economy and government if the art of telecommunications were to be set back ten, twenty, or thirty years.
The Constitutional Monopoly A Politics-Oriented Organization
Meanwhile, the Post Office had been in business almost a hundred years before the Bell System was born. It certainly had an auspicious beginning, for Article I, Section 8 of the U.S. Constitution documented the government’s right to own and operate a Post Office : The Congress shall have power to establish post-offices and post-roads. In 1790, the first full year after the Constitution was ratified, the Post Office had revenues of $37,935, against expenditures of $32,140. This was obviously a profit, and for good reason : it is doubtful that the frugal citizens of those lean years would have tolerated serious postal deficits under any pretext. For many years after that there were private mail carriers competing very successfully with the government, but by the middle of the last century most of them had been firmly legislated out of business. In those years postal operating losses were at a minimum, and it wasn’t until after the Civil War that the annual postal deficit became a recurrent pestilence.
Today the Post Office is the government’s largest business, with 580,000 employees, 35,000 post offices, and annual revenues of $3.4 billion. Its visible deficit in 1961 was more than $800 million, and since 1946 its cumulative deficits have been almost $8.5 billion. It does not pay income taxes, of course, so a realistic analysis of Post Office operations should actually add to the present deficit an estimated amount that the Department would have paid into the federal treasury if it were a private corporation and earned average profits. The loss to the government units in taxes may actually be the Post Office Department’s largest "deficit," for as we shall see later, American Telephone and Telegraph Company has paid far more to federal, state, and local tax collectors than the total of its net earnings.
Since even a casual examination yields evidence that our telecommunications industry towers head and shoulders above our postal service, the next problem is to discover why. And while many reasons are often given to explain why the Post Office is the way it is, few go further than to plead for changes in rates, use of automated equipment, higher wages, greater employee efficiency, and similar so-called solutions. Yet what has prevented the Post Office from improving its operations regularly and without fanfare, as might any other business? Does it take an act of Congress to bring these things about?
Yes, it does. And this is the core of the Post Office problem:
The Post Office is a politics-oriented institution, and has been ever since the day our Constitution first breathed it into life. As a politicalized enterprise, it will forever do an adequate or superior job of satisfying its political masters in Congress and the White House, but under these circumstances it hasn’t the slightest chance of turning in an operating performance that would be considered superior by business standards. The Department is far more sensitive to the most dominant political winds than it is to the need for "breaking even" or giving users "better service." This is, in fact, its central malignancy. "When the politics motive supersedes the profit motive," wrote Frank Chodorov, "the direction and intensity of effort is completely altered. The officeholder’s bread is not buttered by a customer but by a higher-up, and hence his natural inclination is to cater to the latter, not the former."8 And the Newsweek article previously cited took note that though the Post Office Department needs technological improvement almost desperately, "there is little incentive to replace postal clerks, who can vote, with machines, which can’t vote."
Political Pressures Call the Tune
At no time does this political sensitivity of the Department become more obvious than when a proposed postal rate increase comes before Congress. Tremendous pressures are imposed on Congress by those who have an interest in preventing the increases on the classes of mail they use. This year the second and third-class users have bitterly denounced the fact that proposed increases for first-class mail are proportionately less than on the others. Yet as one looks at the bewildering rates system used by the Post Office Department, it is clear that political considerations made it expedient to give second-class users (i.e., paid circulation periodicals) extremely low rates and third-class mailers (usually business organizations) special advantages.9
If one doubts that political considerations shape the running of the Post Office, he should check some of the national magazines earlier this year and read the editorials and articles which they ran in their own interest in bitter opposition to the proposed increases on second-class matter. For example, in an article entitled "Second-Class Mail Rates Can Ruin First-Class Magazines," in The Reader’s Digest of this past April, the magazine summed up its case against higher rates for newspapers and magazines by urging readers to make their views (that is, The Reader’s Digest’s views) known to their congressmen.
While again scoring the Department for its inefficiencies and obsolete methods, as it had done some years before, the Digest failed to explain how the Post Office got that way. It was said that the Department performs many functions which are unrelated to the carrying of mail and for which no payment is made. But isn’t it obvious that these functions must have at one time or another been assigned to the Department by either the legislative or executive branches of the government, and that, therefore, the very Congress to whom we are supposed to appeal for a solution to the "postal mess" is, infact, a partial cause of it? We expect the Post Office to be efficient and modern and flexible; yet we have imposed on it a 535-man "board of directors" that has, itself, often used its free postal privileges shamelessly.
There’s nothing wrong with the Post Office that couldn’t be corrected quickly if we really did have the courage and good sense to put it on a "businesslike basis." This would actually mean cutting it loose from all political control whatever, and releasing it from government ownership, for the distressing truth is that the government cannot resist meddling with that which it owns. In the case of the Post Office, this political meddling has led the Department in directions which no private business could travel and remain solvent.
A Profits-Oriented Organization
Again in sharp contrast is A. T. & T., which has been able to manage its affairs so that special interest groups of customers aren’t at war with the company and each other. A. T. & T.’s chief advantage, among many others, is that it has the good fortune to be a profits-oriented organization.
It is still primarily a business organization and must earn profits to survive at all. Its excellent earnings record also accounts for A. T. & T.’s continuing growth and vigor.
In the years 1946-1961, A. T. & T. earned profits of $93/4 billion. Out of this amount it paid dividends of $6.6 billion, leaving $3.2 billion retained in the business. This was part of the company’s investment in its future. Without these profits, there would have been little or no growth, for additional capital for expansion simply wouldn’t have gravitated toward a losing business.
Incidentally, the Bell System’s revenues have also contributed mightily toward the support of government, for in the same period it has paid out more than $15 billion in local, state, and federal taxes.¹º
The A. T. & T. vs. the
It can be argued that it is unfair to attempt comparison of A. T. & T. and the Post Office, since the methods of communication differ radically. A. T. & T. deals primarily with circuitry, which when installed can handle verbal messages instantaneously. Not so the Post Office, which must transport solid objects over great distances and is necessarily limited by the reasonable speed at which man and machine can travel. It is unfair, for example, to say that because the Bell System can connect a
Still, it is fair to say that of two dissimilar communications systems, one is partially failing us while the other seems destined for greater achievements. It is fair to wonder how the delivery of written communications would have been handled if our national traditions hadn’t imposed on us an ironclad government postal monopoly. Would the Postal Service now be faced with mounting deficits? Would there have been a long period of time when the service actually made no investment for new buildings, as union official William Doherty has charged, due to the unwillingness of Congress to appropriate money for this purpose?¹¹ Would a letter carrier now earn a starting salary of $4,345 a year, with a 25-year maximum of $5,605, or would wages and salaries be much higher?¹² Would the service be using such antiquated methods that as late as 1953, incoming Postmaster General Arthur E. Summerfield could make the shocking discovery that postal clerks in Denver had to sort mail out on the street because of cramped building space?" Would deliveries be faster or slower? Would automated methods of handling mail have been put into widespread use? Would it be possible to get letters delivered the same day of mailing in metropolitan areas? One final remark: It is said that thousands of special delivery letters are actually delivered by regular carrier, since no special delivery service exists at certain times in many communities. Yet the person mailing the letter has no practical way of knowing this, and thus wastes his extra 30¢ postage.¹¹4 If a private postal enterprise existed and engaged in this dubious form of customer-deception, would government regulatory agencies not order a full-scale investigation?
A Marked Contrast
It is, then, fair to say that A. T. & T. gives excellent service in its field, while the Post Office is giving mediocre service that is obviously incompatible with our present state of economic development. It is fair to say that A. T. & T. operates efficiently, with a persistent attempt to cut costs and improve its own organization, while the Post Office operates with only a fair degree of efficiency, often because Congress does not appropriate capital funds. It is also fair to say that A. T. & T., despite its monopoly status, runs its affairs as competitively as any other
Could A. T. & T. run the Post Office? Certainly it could, although it’s not certain that there is any great advantage in combining the telecommunications and letter-carrying systems, despite the example of
After the chuckles had subsided, a few thoughtful persons in attendance might conclude that this wasn’t a bad idea after all.
1 Frank Chodorov, The Myth of the Post Office, Henry Regnery Company,
2 From The World’s Telephones, 1961, American Telephone and Telegraph Company, 195 Broadway,
4 Horace Coon, whose American Tel & Tel was itself a book highly critical of A, T. & T. on many counts, wrote: "It is generally conceded, even by its critics, that (A. T. & T.) has given the
5 1961 Annual Report, A.T. & T. All A.T. & T. statistics, unless otherwise noted, are from this report.
6 Horace Coon, op. cit.
7 Annual Report of the Postmaster General,
9 To use only two examples. It is safe to say that the rates and handling of all mail and every type of delivery (such as R.F.D.) have been influenced by political forces.
10 A.T. & T. yearly financial figures obtained from Moody’s Public Utility Manual, 1961, and Moody’s Public Utilities,
¹¹ "In the twenty-year period between 1938 and 1958 Congress failed to appropriate as much as a single dime for the construction of new postal facilities." William C. Doherty,
12 Salary information obtained from National Association of Letter Carriers, AFL/CIO, Bulletin No. 1,
13 Arthur E.
¹4 Floyd Clymer, The Post Office Dilemma, Floyd Clymer,
15 At least in the metropolitan areas, according to The New York Times, November 27, 1955, U. S. News & World Report, February 7, 1958, and Newsweek, op. cit. Some foreign cities (