Freeman

ARTICLE

Could A.T. &T Run the Post Ofice?

OCTOBER 01, 1962 by MELVIN D. BARGER

Mr. Barger is a public relations representa­tive in Jackson, Michigan.

"Custom has so strongly
imbedded the monopoly myth in our minds
that the mere suggestion of a private
postal system seems incongruous."

Frank Chodorov¹

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 Italy, Spain, Denmark, and Fin­land."-’ At least four countries—Great Britain, France, Holland, and West Germany—have com­bined postal and telephone serv­ices, with whatever advantages this is supposed to produce.

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 July 13, 1959 issue, observed that the U.S. mail is slow because of "antediluvian methods and equipment, human error, a system plagued by bureaucracy and petty politics." It was further noted in the same ar­ticle that the service was so bad that one in four letters was being delayed, sometimes for days, en route or at a delivery point. Worse yet, it was stated that the Post Office’s problems were getting worse, and seemed to be outrun­ning its solutions.

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 Great Britain were na­tionalized, a move which aroused sentiment for a similar action in the U.S. But, Vail believed that A. T. & T. could survive and pros­per even under government regu­lation, and could resist a govern­ment takeover if he could build a system far better than any of the nationalized systems in other countries. This, plus a rather inept performance on the government’s part when it controlled the com­pany briefly during the closing days of World War I, finally killed, for the time being, most of the political impetus for govern­ment ownership.°

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 U.S. Post Office

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 New York caller with a San Francisco num­ber in two minutes, or less, the Post Office should deliver a letter with similar speed. Moreover, the Bell System with its automatic dialing systems and other crea­tions is rapidly eliminating the possibility of human error, while postal clerks are still forced to waste long minutes studying, for example, (unreadable signature) and fi­nally determining that this is a communication addressed to Jack­son, Michigan, and not Jackson, Mississippi. Obviously, A. T. & T. and the Post Office have com­pletely different operating prob­lems.

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 U.S. enterprise, going to great lengths to promote new tele­phone services, courteous treat­ment of customers, and installa­tion of additional telephones in businesses and residences. But postal units do not seem to be competing with anybody, and hardly appear to recognize that it would be possible to increase the department’s revenues by hard-hitting promotional cam­paigns and programs designed to give customers better service. It is also fair to ask if it is even a moral thing for the federal gov­ernment to maintain such an en­terprise as the Post Office, or any business, using the power of the state to force citizens to subsidize a service which is of much greater benefit to some users than it is to others. All other businesses, mo­nopolistic or otherwise, must rely on the customer’s voluntary pa­tronage in order to survive. But in the case of the Post Office, the money which makes up its deficits is taken from us against our will, while federal police power pre­vents other competitors from en­tering the field and giving us al­ternate forms of letter delivery.

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 Great Britain and others. However, it is clear that somebody, if not A. T. & T., could run it much better than the U. S. Congress and President can, or are allowed to by the political na­ture of things. At some point in future government deliberations over postal policies, a hardy soul ought to inquire into the reasons why the United States has the world’s best telephones and the Western world’s slowest mailbags.¹5 The answers might cause some government official to say, in a somewhat facetious manner, "Hey, maybe we ought to turn the Post Office over to A. T. & T. and see what they could do!"

After the chuckles had sub­sided, a few thoughtful persons in attendance might conclude that this wasn’t a bad idea after all.

Foot Notes

1 Frank Chodorov, The Myth of the Post Office, Henry Regnery Company, Hinsdale, Illinois, 1948.

2 From The World’s Telephones, 1961, American Telephone and Tele­graph Company, 195 Broadway, New York. It should be noted that the Italian telephone system is government-owned but privately-operated, while the Fin­nish and Danish systems are mixed. ­3 The Reader’s Digest, February 1958. 3 The Reader’s Digest, February 1958.

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 United States the best telephone system in the world, in nearly every respect superior to any of the government-owned systems in Europe." Horace Coon, American Tel & Tel. New York: Longmans, Green and Co., 1939. (It should be noted that Coon’s observation preceded A. T. & T.’s tremendous growth and improvement of services in the post-World War II period.)

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, U. S. Post Office Department, Washington, D. C., 1961. Unless other­wise noted, all subsequent statistics con­cerning Post Office operations are from this report.8 Chodorov, op. cit.

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, February 20, 1962, published by Moody’s Investor Service, New York. Totals were computed by author.

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, Mailman, U.S.A., David McKay Company, Inc., New York, 1960. Mr. Doherty, who is president of the National Association of Letter Car­riers (AFL/CIO), credits Summerfield’s plan of leasing postal facilities built by private capital with having saved the system from absolute chaos. (Elsewhere in his book he is less complimentary toward the embattled postmaster gen­eral of the Eisenhower administration.)

12 Salary information obtained from National Association of Letter Carriers, AFL/CIO, Bulletin No. 1, January 2, 1962.

13 Arthur E. Summerfield, U.S. Mail, Holt, Rinehart and Winston, New York, 1960.

¹4 Floyd Clymer, The Post Office Di­lemma, Floyd Clymer, Los Angeles, 1960, page 166.

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 (Lon­don, Paris, Berlin) have same-day de­livery.

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October 1962

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