Postal monopoly causes failure

Politicians Pander to Unions

Like any other company bedeviled by low productivity, archaic work rules and falling demand, the US. Postal Service is in trouble. But unlike other distressed companies, it enjoys a government-enforced monopoly, Failure tends to discipline errant businesses. When consumers stay home, companies cut prices. When marketing strategies fail, firms revamp operations.

But not the post office. Coming soon is the third rate increase in 18 months.

For years postmasters general have waxed eloquent about making the Postal Service into a dynamic, forward-oriented operation. But that will never happen so long as Uncle Sam prohibits anyone else from delivering first-class mail. Nor will the post office feel sufficient pressure to become efficient as long as Uncle Sam pays postal workers' pensions. The post office also is exempt from customs duties and business taxes. And the Postal Service operates unhindered by local traffic and zoning laws.

'Sclerotic Performance''

The result is persistently sclerotic performance. For instance, productivity is up just 11% over three decades, compared to 53% in the private sector. And that's after nearly doubling total capital investment.

The Postal Service's Office of the Consumer Advocate recently pointed to problems with which any consumer is familiar, including long lines. The highly touted Priority Mail, which is going up to $3.85 in June, often takes longer to deliver than normal first class-mail.

By politicizing mail delivery, Uncle Sam has made it hard for even the most committed managers to improve operations. As Jerry Terry at the National Taxpayers Union puts it: "political pressure from powerful labor unions ensures that Congress will not allow free-- market competition." Postal workers are thought to be the highest paid semi-skilled employees in the world, collecting nearly a third more than warranted by their output.

So managers focus on making themselves look good. For instance, complains Rick Merritt, executive director of PostalWatch, the post office has improved its official on-time delivery record simply by reducing requirements adjudged too hard to meet.

Moreover, the availability of guaranteed monopoly revenues has encouraged the post office to expand into other markets. Notes Terry: the agency "also provides extra services which just a few years ago were only found in the realm of private enterprise-overnight and parcel delivery, prepaid telephone calling cards, packing materials, message services, electronic bill payments, and even sponsoring a bicycle racing team."

Yet the Postal Service wants to do even more. Postmaster General John E. Botter observed: "What other entity in the world would have 38,000 retail outlets and limit themselves to selling stamps?" But what other entity has a monopoly and still doesn't do its basic job well?

Although the post office resolutely fights to protect its monopoly, it keeps doing less of the work. For instance, it hires independent contractors to deliver rural mail and answer telephone queries.

The Postal Service cuts its price when mailers pre-sort their mail. It ships 3.5 million pounds of mail on Federal Express, with which it competes to deliver packages.

Rate Hikes and Red Ink

But even shifting its work onto private operators hasn't stemmed massive losses, $1.7 billion last year-despite an earlier rate bike that pulled in an extra $3 billion. This year red ink will run $2 billion.

The Postal Service's preferred alternative is rate hikes coupled with diminished service, such as fewer post offices and less frequent delivery. For developing such a strategy the Postal Service shells out bonuses to six of every 10 employees, $124.5 million worth last year.

The post office knows it is in trouble and is pushing to allow "managers [to] operate under more businesslike conditions." The only effective way to do that is to turn the postal service into a real business.

Congress should drop the Private Express statutes and let anyone deliver the mail. At the same time, legislators should drop the requirement that the Postal Service deliver to everyone everywhere at the same price-let the post office compete like anyone else.

The result would be better service at less cost. That's the experience of competition throughout the economy. And that's why foreign nations, such as Britain, Germany, the Netherlands, New Zealand, and Sweden, have all moved toward privatization. The main argument offered against turning postal delivery over to the marketplace is that some people in distant locations might have to pay more. So what?

Housing costs typically are lower in rural areas. Should urban dwellers be subsidized to ensure uniform home prices? It's obvious that the Postal Service is- good about protecting itself: the coming rate increase will cost consumers an extra $500 million a month. It's time Congress started protecting those supposedly being served by the post office.

Mr. Bandow is a senior fellow at the Cato Institute and an adjunct scholar at the Future of Freedom Foundation.

Copyright Human Events Publishing, Inc. May 6, 2002
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