Saturday, April 18, 2009

The case for postal privatization

Mark Perry links to a couple of columns that advocate massive reforms to the US Postal Service. A few facts:
  • Postmaster Gen. John E. Potter recently announced that the postal service saw a $2.8 billion deficit in 2008 and forecast a net loss of $6 billion for 2009. That's about $58 per taxpayer.
  • USPS workers receive an average wage of $42 per hour. That's over $87,000 on an annualized basis.
  • New Zealand corporatized its postal service in 1987. The move ultimately led to improvements in efficiency, a 40% reduction in the system's workforce, a doubling in labor productivity, a decrease in the cost of sending letter and a decrease in the price of a basic stamp. Moreover, New Zealand was able to accomplish all of this and maintain comprehensive service to both urban and rural communities.
  • The post office has a government granted monopoly on the shipment of non-urgent letters. That means that if you send a non-urgent letter via some other method you are breaking the law.
This is typical of government services, featuring waste and inefficiencies. When they lose money we all have to make up the difference through our taxes. Now just start to imagine these same people running health care.

The obvious solution is to, at a minimum, end the monopoly and force the USPS to compete. The best solution is privatization. After all, if the USPS is currently doing the best job possible then it should have little to fear from competition. If it is operating as efficiently as possible it should have little to fear from privatization.

Unfortunately this is unlikely to happen, both because of the plodding nature of government as well as resistance from the American Postal Workers Union. The union boasts over 200,000 members and is affiliated with the AFL-CIO, ensuring a direct line to the White House. Here are postal workers from other countries that have attempted privatization:

The UK


Indeed, if one scrolls through the comments section of the Forbes column that Perry links to you see all sorts of nasty responses, a number of which appear to be from post office employees. A sample:
Written like true conservatives/Republican​s who believe the unfettered free market is the best way for society to function. WAKE UP buddies. It failed. Get over it and get your greedy incompetent hands off another institution your ilk would love to squeeze dry. Government plays a role in our lives and the only mistake about the Postal service has been allowing it to be quasi-Governmental. It should be reformed to be 100% Government agency. This schizophrenic agency's problem is trying to cope with being a private entity too. That's why middle and upper management cause so many problems, creating chaos. The solution is go all the way as a Federal agency AND create an effective OIG to watch over waste, fraud, and abuse.
This one is perhaps more revealing, someone who -- in the process of defending the post office -- reveals how badly it needs to be privatized:
Did the academic types who wrote this article consider what would happen if a private company had to factor in the payment of taxes? How much would the letter across the street cost then? That's part of the reason why the Postal Service is "federal". Did the academic types know that the Postal Service cannot compete with FedEx and UPS because the Postal Service cannot own or lease a fleet of airplanes to carry the mail around the country? When the Postal Service tried this, FedEx and UPS cried foul all the way to Congress! The Postal Service is mandated to "break even". It is not to post a profit, and by the same token, it is not to lose money either. Try to put that in your business model and make it work. As everyone knows, academic types are snobs, they hate the other schools in their universities and think their school is better than the other. Go back to talking about where the new professor got his PhD. Wait, let's check to see if the writer got his degree online! If so, it's not a "real" degree. The internet is impacting academia also.
Again, this is a good proxy for health care if the government should ever take it over (well, more than it has already). We would get waste and inefficiency, and once the government owns it the struggle to get it back to the private sector will be damn near Sisyphean.

Update: Oh, and check out this anecdote from one of the commenters on Mark Perry's site:
My local Post Office recently took out all its stamp machines because, they told me, the Post Office can't make its stamp machines work.

Right afterward the NY Times ran a story confirming this is indeed true nationwide -- the USPS is a abolishing stamp vending machines in total. So if you want to buy a book of stamps, or a limited number like six or seven, at the post office you now have to wait on line not only behind everyone mailing a package or registered letter or needing a passport, but now also behind everyone else newly on the line to buy stamps.

Back to my local post office: While waiting in line I asked the postal person gainfully employed directing whoever was at the front of the line to the next open window, "Why are you getting rid of the machines so I have to wait here?"

Well, because they are impossible to keep working, they can't read the new version dollar bills, etc.

"But there's a candy machine and a soda machine, and back in your sorting area there I see a coffee machine for employees. Are they all working OK?"

Sure, but we don't own them, they aren't our machines...

Meawhile the deli across the street has started selling stamps with a 35-cent mark-up per stamp.
Government vending machines broke, privately owned ones working. Kind of says it all.

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