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Privatizing the Postal Service: Historical Precedent

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January 29, 2009 – Comments (10)

Once again a lack of historical knowledge allows Statist propaganda to spread. It is up to the well-read and motivated to refute their authoritarian nonsense. I am reading today on several blogs and news sites, including here at TMF requesting that mail carrier service be opened up for competition. The Statist would like you to believe that such an essential service must remain in public control. After all, it's an essential public service, used widely by lower income households. Without the wonderful U.S. Postal Service, no capitalist would ever take up to help these poor souls out. The same ridiculous and illogical argument is put forward for every government service where a monopoly/cartel is allowed, be it firefighting or cable television, usually by the same people who decry monopolies as the scourge of the capitalist! Ha!

Nonsense! Enter Lysander Spooner, Libertarian activist, and general pain in the Establishment's ass.

"Born on a farm in Athol, MA, in 1808, young Spooner studied law, pamphleteered and crusaded for dozens of causes before hitting upon an adversary worthy of his mettle: The United States Post Office, and he almost put it out of business!

By 1844, the spiraling postal rtes had so irked Spooner that he began an extensive study of the situation. There was no question that rates were much too high. It cost 18 3/4 cents to send a letter from Boston to New York and 25 cents to send on all the way to Washington DC A letter sent from Boston to Albany, NY written on a 1/4-ounce sheet of paper and carried by the Western Railroad, cost 2/3 as much as the freight charge for carrying a barrel of flour the same distance. Spooner's summation of his study was succinct: high cost and no service.

People were trying numerous means to circumvent high postage rates and, for the most part, were failing. To those who tried to out-maneuver the Post Office, Spooner gave a loud "hurrah," but he could see that they were fighting a losing battle. With no other solution in sight, he decided to go into competition with the U.S. Government.

To begin with, Spooner couldn't understand why the Post Office should have a monopoly on mail delivery. He was schooled enough in law, however, to know that the Constitution ordered Congress to provide for mail delivery and it had done so with a postal department. But the wily Spooner found a loophole - the Constitution did not declare that a private citizen could not do likewise.

Spooner squared off for battle! With the loopholes his main ammunition, he organized his own postal service and audaciously named it "The American Letter Mail Company." The company offered to deliver letters, with no limit on weight at reduced rates. He even ran an ad on the front page of the "New York Daily Tribune" with the following information: "AMERICAN POST OFFICE - The American Letter Mail Company has established post offices in New York, Philadelphia, Baltimore and Boston, and will deliver letter daily from each city to the others - twice a day between New York and Philadelphia. Postage 6 1/4 cents per each half-ounce, payable in advance always. Stamps 20 for a dollar. Their purpose it to carry letters by the most rapid conveyances, and at the cheapest rates and to extend their operations (as fast as patronage will justify) over the principal routes of the country, so as to give the public the most extensive facilities for correspondence that can be afforded at a uniform rate.

"The Company design also (if sustained by the public) is to thoroughly agitates the questions, and test the Constitutional right of the competition in the business of carrying letters - the ground on which they assert this right are published and for sale at the post offices in pamphlet form."

The public enthusiastically approved the venture. Congress, however, was sputtering and the Postal Department was howling - all of Washington was enraged. How dare Spooner fo this?; How dare he so openly flout the Constitution? Government postal revenues took a nose dive while "The American Letter Mail Company" went merrily on its way picking up the postal business everywhere.

Washington lawmakers had no intention of sitting still for any "that Spooner's shenanigans." The midnight oil burned as attorneys pored over their books. Soon, the suits against Spooner and his cohorts began. Railroad heads were given full warning that government mails would be removed unless space and passage were refused to private letter carriers. It was "round one" for the government when an agent of Spooner's company was found guilty and fined for transporting letters in a railroad car over a postroad of the United States.

The "round two" went to Spooner when a U.S. District Judge advised a jury that owners of conveyances were not liable under law if, unknown to the owners, a letter carrier brought mail aboard a train of steamboat. The "not guilty" verdict was sustained by the U.S. Circuit Court which expressed doubt that the U.S. had the right to monopolize the transportation of mail. This was tantamount to a commendation of Spooner's theories.

For the postal officials it was a low blow and they sought further legal means to put an end to Spooner and his trouble-making company. More court reversals followed. Finally, the Postmaster General felt he had to bow to the issues and went before Congress to plead for the authority to lower postal rates.

In March, 1845, a reduction of postal rates was approved and put into effect that July. Letters weighing less than a half ounce could be sent any distance under 300 miles for five cents. Even the rates for newspapers were reevaluated and changed so they could be mailed without charge within a 30-mile radius.

Spooner, feeling that his efforts and his company were doing a great deal of good for the citizens of the land, wasn't through fighting. His counteraction caused even greater consternation to his opponents - he lowered his rates. So the battle of law and loopholes continued.

In 1851, Congress again lowered rates and simultaneously enacted a law to protect the government's monopoly on the distribution of mail. Whereas threats of jail had not fazed or dampened Spooner's zeal in the fight, the latter move by Congress forced him into defeat.

Later that year, Congress lowered the postal rate to three cents for delivery anywhere in the country. In 1958, it had climbed to four cents and has not stopped climbing since.

As for Spooner, his great battle had ended and his company was disbanded. He died in 1887, his death barely noticed by the public. No one seemed to remember the man who had been able to show everyone what old-fashioned courage and enterprise, plus competition, could do to change things. He had proven that a cheaper and more efficient postal service was possible."

The moral of the story: any service that the consumer demands will be filled by an enterprising entrepreneur if the government allows him/her to do so. Rather than arguing over which part of the economy should be stimulated and what actions the government should take, they should be questioning the rationale for its existence. After you do, please come and join us at the Libertarian Party.

Regards,

David in Qatar

 

10 Comments – Post Your Own

#1) On January 29, 2009 at 11:01 PM, StockSpreadsheet (70.45) wrote:

David,

My response would be the same as I said in TDRH's blog on this subject.  I agree that if you cherrypick the locations that you will serve, (such as the big cities that Spooner served in your article), that you could provide cheaper service than the USPS does today.  You would have a lot of volume that only needs to move a short distance or that can be moved in bulk.  However, allowing a private company to do this would mean that they would take over the most profitable routes, (between the 100 or so largest cities in America), and they would leave the rest, (often unprofitable routes), to the government to subsidize or the people in the smaller towns would either pay much higher prices or lose mail service altogether.  

I will state that if the companies that want ot provide competition to the USPS agree to deliver mail to EVERY SINGLE mailbox in a state if they deliver to ANY mailbox in that state, (including post office box or anywhere else that mail is delivered), for the same price as they deliver it between places such as New York and Boston, then I wholeheartedly am in favor of the competition.  I do not think that they should be able to charge $0.05 to deliver a letter from Los Angeles to San Francisco but charge $5.00 to deliver a similar letter between Los Angeles and Ojai, California.   I also think that they should have to cover regions, (so no delivering mail from New York to Los Angeles, (or New York to California), without serving the states inbetween.  (Another way to keep them from only picking up states like New York and California and ignoring states such as Wyoming and Montana.)  Again, with those restrictions, I definately think that competition should be allowed.  If the competition puts the USPS out of business, that is one less beaurocracy that the U.S. taxpayer needs to fund, which is a good thing in my book.

Hopefully, if they do that, then someone can do the same and compete against Amtrak so we can put that boondoggle out of its misery and get it off of the taxpayer dole also.

Craig 

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#2) On January 29, 2009 at 11:40 PM, Tastylunch (29.37) wrote:

I agree with Craig.

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#3) On January 30, 2009 at 12:10 AM, whereaminow (25.00) wrote:

Craig,

Thanks for your thoughts. What about Southwest Airlines? Southwest Airlines should have been smashed and put out of business by United and America. After all, UA and AA had established themselves by cherry picking the largest centers for their hubs, while Southwest chose only alternate destinations as their beginning business model with no hub at all. Smaller communites should have suffered because of this, but instead SA has greatly benefited them.

In Spooner's defense, wouldn't another company have formed, like Southwest, to service those routes, had the government not made it illegal to do so?

David in Qatar

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#4) On January 30, 2009 at 12:10 AM, angusthermopylae (39.45) wrote:

As I commented in the other blog, I don't understand the "monopoly" and "inefficiency" arguments.  Exactly how is the USPS inefficient?  Numbers, man, numbers....

There is competition--you can choose one of several methods to deliver most mail/packages (USPS, Fedex, UPS),  Doesn't sound like a monopoly to me...

And, additionally, I agree with your Tale O' Spooner, but I draw a different conclusion:  Monopolies of any sort cause inefficiency and bloat, and that the competition to the USPS by Spooner forced the system to change and become better overall.

As for "Statist Propaganda,"  I'm not sure what to say; the term isn't exactly clear to me (meaning "the State" is the answer to all problems?), and I'm definitely the last one to ever argue for bigger government.

However, I reiterate my  counterargument--it's a necessary service.  Mere "inefficiency" is both hard to define and could be applied to many other government functions that I don't think anyone would want privatized (police, military, road construction).  

And, lastly...couldn't the same point be made in the opposite direction?  That the presence of the USPS forces other mail/package carriers to keep their rates low?  It may not have always been so, but it certainly looks that way now....

Just my inflation-adjusted 2 cents.....

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#5) On January 30, 2009 at 12:32 AM, DaretothREdux (43.88) wrote:

angusthermopylae,

And, lastly...couldn't the same point be made in the opposite direction?  That the presence of the USPS forces other mail/package carriers to keep their rates low?

For packages, yes. That is precisely the arguement being presented. What about letter delivery? Do you not think that we should allow other companies to compete for that as well to keep prices determine by the market instead of by government whims?

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#6) On January 30, 2009 at 1:26 AM, starbucks4ever (98.07) wrote:

I don't see the evidence of monopoly here. Last time I checked, FedEx was still delivering letters. Its rates are extortionate and its service is atrocious, but if you want to practice your love for free enterprise, you always have the choice to ship letters through them. True, they will put your credit card number on the outside of the envelope to be seen by Quatar customs offcials, but what do you care? After all, it comes from a private company. Hurray for free markets!

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#7) On January 30, 2009 at 1:36 AM, DaretothREdux (43.88) wrote:

zloj,

The USPS loses money on its first class mail and it has to be subsidized! Yay for not free markets....

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#8) On January 30, 2009 at 1:50 AM, starbucks4ever (98.07) wrote:

The current system is a good one. The state-run dinosaur is competing with a bunch of small mammals. The presence of the dinosaur sets a limit to corporate greed, and the presence of the mammals does not let the dinosaur grow too complacent. By and large, in a low-tech, boring, and capital intensive industry like mail delivery, a state-run company is more efficient than free enterprise.

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#9) On January 30, 2009 at 2:19 AM, tonylogan1 (28.23) wrote:

Why can people not understand that it is illegal to send non-urgent mail through anyone other than the post office. The government has made it illegal.

Companies have been fined when the USPS finds that they use FedEX or UPS for "non-urgent" mail.

The government does not want to give up monopoly becuase it does not want to lose power and control.

Example: If you are a magazine publisher you cannot legally send magazines via anything other than the USPS. Therefore, when the post office decides how much to charge to send magazines, they either encourage or discourage the spreading of new (smaller company) ideas.

The founding fathers knew this was the case and they therefore set up the postal system to give discounted rates for small magazine companies (to encourage the spread of ideas instead of just big news companies dominating).

 When it last came time to revisit the rates for magazine distribution, what you think happened? The biggest media publishers spent millions of dollars lobbying to raise the rates on small magazines and not on large ones, and what do you know, the US government, bought and paid for, stomped yet again on one more freedom in the interest of corporatism.

Jeeze don't get me started.

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#10) On January 30, 2009 at 9:07 PM, StockSpreadsheet (70.45) wrote:

David,

I don't consider the Southwest Airlines example to be pertinent.  (To be fair, I can't think of one right now I would consider pertinent.)  I don't consider Southwest service to be as basic as mail delivery. 

In the case of Southwest, there are usually lots of competing airlines, (though there are often local semi-monopolies, since, for example, I think I read that over 90% of all flights into Atlanta are flown by Delta, so not much competition there).  Also, in the case of travel, you can also go by train, (in many cases), bus or by automobile/truck/motorcycle/whatever.   In fact, if you are needing to transfer a lot of equipment, (moving, for example), then the auto/truck is practically your only option.  Therefore, if you needed to get from Point A to Point B, you have lots of options.

In the case of mail delivery, hand delivering your mail, (in my case, from my home in San Diego to my parents' house in Connecticut, for example), is just impractical.  If I had to hand deliver it, I would not bother writing and would just fly myself there and be done with it.  Therefore, I think of the Post Office as being a basic service.  I don't mind the competition as long as it is a level playing field.  If UPS or FedEx can deliver my mail from San Diego to my relatives in Ada, Oklahoma cheaper than the USPS, then it should be legal for FedEx or UPS to deliver my mail for me. 

Now if FedEx and/or UPS, (or whomever), want to deliver the mail between major cities and state capitals and then contract with local companies to deliver the mail to the individual homes/post office locations, (similar to how DHL is still operating in Europe by has contracted UPS or FedEx to deliver packages to U.S. locations), then I have no problem with that.  I don't care too much how the letter/package gets from Point A to Point B as long as it gets there, and I don't want to have to worry whether or not Point A or Point B is considered a major metropolitan area or a Podunk, Nowhere location.  I'm all for competition, as long as the competition is on a level playing field.  If UPS or FedEx want to compete with the USPS, then they should compete with them on a level playing field, not cherry pick the most profitable routes and leave the least profitable routes for the USPS to serve.  I think that is a disservice to everyone, but that is just my opinion, (though I think it is one shared by many).

Also, while we are having the discussion about how "inefficient" the USPS is, I feel that I must point out that an article I read a while back says that something like 99.99% of all letters are delivered to the correct location within 3 business days.  That is hardly an inefficient system and is not too much worse than USPS and/or FedEx, (who I think claim 99.999% efficiency, but at a MUCH higher price).   

Cheers!

Craig 

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