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America Is No Free-Market Leader When It Comes To Postal Reform

We don’t need a government monopoly to deliver the mail

The United States prides itself on being a free-market leader – a country where big government famously takes a back-seat to private competition. But amazingly, when it comes to its $900 billion mail industry, the U.S. lags far behind much of the rest of the world. As other nations move rapidly towards postal privatization, the U.S. government simply refuses to let go of its gargantuan, money-losing postal monopoly.

Industrialized nations from New Zealand to Sweden now allow competition in mail delivery, and many have already begun privatizing their national postal services. Germany’s Deutsche Post had its first public stock offering in 2000, when investors eagerly applied for eight times of the number of shares available.

Recently, Deutsche Post’s subsidiary in the Netherlands called for a swifter opening of the Dutch postal market. The economic benefits of such a move would likely include better prices, more jobs, and increased investment. Even developing countries including the Philippines, Jordan, and South Africa are embracing postal competition.

This year Japan launched a privatization plan, championed by Prime Minister Koizumi. The plan, which is meeting with considerable and predictable resistance, carries the public blessings of the U.S. Trade Representative. In fact, Deputy USTR Josette Shiner declared last month that, “Japan Post privatization should be market-oriented and carried out in a transparent way that establishes a level playing field for all participants in the sector.”

But that could hardly be further from describing postal markets in the U.S, where even modest postal reform plans fizzled out after receiving little enthusiasm in Congress.

Currently, the USPS has over $80 billion in unfunded liabilities – money it has promised to employees in retirement and health benefits, that it simply doesn’t have. On top of that, steadily declining mail volumes – brought on by the Internet revolution – spell disaster for an organization whose sole purpose is delivering the mail.

Making matters worse, Postal representatives now say Americans can expect a 12-to-15 percent stamp-price increase in 2006. That could take as much as $10 billion (roughly the GDP of Jamaica) out of the U.S. economy.

Other countries whose national posts were faced with similar problems are moving to cut costs and improve productivity through privatization. U.S. lawmakers could take a lesson from these pro-competition neighbors.

Perhaps the most important lesson is that preserving “universal service” is not the deal breaker American postal negotiators make it out to be. This concept of six-day-a-week delivery, at uniform rates, to every single address in America is outdated. It predates the telegraph, let alone email. Quite simply, it’s time for the Americans to recognize that the personal letter is no longer the glue that holds society together.

America – like the rest of the world – doesn’t need a government monopoly to deliver the mail anymore. Private companies can get the job done just fine. In fact, the vast majority of what USPS delivers these days is bills, advertising and business correspondence.

There are any number of innovative models to ensure that people are guaranteed inexpensive mail services without stamp-buyers having to support a massive inefficient government bureaucracy.

Sweden, for example, has adopted an approach in which the government can hire private companies to ensure that people in less-profitable rural areas still receive their mail. In other words, the government still has the burden of ensuring that everyone has access to the mail, but private companies can now compete to deliver it.

Belgian Senator and liberalization champion Philippe Bodson, has noted that “as long as markets remain closed or only limitedly opened to competition, postal users will continue to lack choice and ?¢â??¬ ¦ pay excessive prices.”

He was referring to Europe, but might as well have been speaking about the U.S. Postal Service. The entire world should listen. The benefits of real, meaningful postal reform to consumers are enormous. It’s happening all around the world – in Europe, Asia and the Middle East. It’s time for America to take a cue from the rest of the world for once, and begin to privatize the mail.

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Written By

Mr. Soifer is Director of the U.S. Consumer Postal Council.

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