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Thursday, November 1, 2001

Mail at the Millennium: Will the Postal Service Go Private? Edited by Edward L. Hudgins

Are the Postal Monopoly's Days Numbered?

The copy of Ideas on Liberty you’re reading was most likely delivered to you by an employee of the United States Postal Service (USPS). If there were alternatives open to FEE in the distribution of its magazine, it would certainly explore them to see if costs could be reduced—but there are no alternatives. Thanks to federal law, the USPS has a monopoly on magazine delivery, as well as letters, bills, and postcards. (My view is that the Private Express Statutes, which create that monopoly, are unconstitutional, since nothing in Article I gives Congress the power to establish monopolies—one of the gripes the colonists had with the British Crown. Now back to the review.)

With communications technology changing so rapidly, many people are wondering whether the postal monopoly will survive much longer. Last year the redoubtable Cato Institute put together a program on the future of the government’s intrusion into the market for mail delivery, and this book is the published version of the proceedings. As usual, Cato’s roster of participants was excellent and the talks given most enlightening.

And, again following its usual practice, Cato did not invite only people on one side of the controversy. The first speaker was none other than William J. Henderson, the postmaster general. Henderson did exactly what one would expect, namely to defend his turf. He argued that the efficiency of the USPS has improved in recent years and that it was beneficial to maintain a one-price system ensuring service for all. “We keep open some 26,000 unprofitable post offices so that every American has access,” he said. Exactly why it’s so important to make sure that we have postal equality when Americans readily adjust to inequalities in other markets he did not explain. As Robert Cohen of the Postal Rate Commission observed later in the program, in a free competitive market, all Americans would still get postal service, only not as often for some. What’s so bad about that?

Several contributors comment on other countries’ privatization of postal services. New Zealand has eliminated the monopoly its postal service formerly enjoyed and privatized à la Margaret Thatcher by selling shares to the public. The Germans are privatizing Deutsche Post. And Sweden—yes, socialistic Sweden—has had the uncommon good sense to allow open competition in mail delivery. These and other foreign developments give one reason for optimism that the days of our own postal monopoly are numbered.

Or are they? The USPS is a behemoth with over 900,000 unionized workers who bare their fangs at the idea of a free market. They are significantly overpaid, D. Richard Froelke observes in his essay, “Labor Market Outcomes of Postal Reorganization.” Froelke writes, “[A]dversarial collective bargaining has resulted in postal wage levels far higher than the compensation and benefits paid for comparable levels of work in the private sector.”

The postal union and USPS management have strong incentives to keep the good times rolling and thus have made moves to reposition their dinosaur for the digital age. In the book’s most worrisome essay, James P. Lucier’s “Dangers in Cyberspace,” the author discusses the problem, saying, “With little fanfare, the U.S. Postal Service is transforming itself from the mostly postal business of the past to something more like an Internet portal for the future. . . . Functions that were once peripheral to its current mail monopoly are central to its new role as the postal e-mail inspector, paymaster, address-bookkeeper, trusted third party, guarantor of identities, architect of on-line business directories, and universal intermediary of cyberspace.”

Not that we need to have a governmental entity providing any of those tasks. Private enterprise can handle it all perfectly well. But the postal administrators and workers want a new role for themselves and will use all their political clout to try to secure it.

Economist Michael Schuyler also explores USPS efforts to infiltrate other areas of business. He favors keeping it out of them, writing, “In addition to its monopoly powers, the Postal Service possesses many advantages that are not enjoyed by private competitors: It pays no income taxes; is exempt from most other taxes; is exempt from many federal, state, and local regulations; has federally subsidized borrowing privileges; and has no investors expecting it to earn profits.” Schuyler wants to see the USPS kept out of competitive markets.

The USPS would like to keep a low profile and worm its way into new areas of business while milking its traditional monopoly as long as possible. The postmaster general and his minions would rather have the public’s attention drawn to glamorous battles like taxes and education while it quietly works in political channels to create a new niche for itself. Bravo to Cato Institute for its efforts to keep that from happening.

  • George Leef is the former book review editor of The Freeman. He is director of research at the John W. Pope Center for Higher Education Policy.