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USPS: The Cursed Carriers

February 14, 2012

Tags Big GovernmentFree MarketsInterventionismMonopoly and Competition

From the original conception of the United States Postal Service in the 1700s to the technologically advanced market of today, the words that enumerated to Congress the power to "establish Post Offices and post Roads" have never been more than a waste of ink.

In Uncle Sam, the Monopoly Man, William C. Wooldridge explains well the historical patterns of failure within the United States Postal Service (USPS):

More than a decade before Parson Weems immortalized the cherry tree, the United States Post Office was losing money. For most of the years since Postmaster General Thomas Osborne reported the first deficit to President George Washington, it has continued to lose money, receiving all the while less critical attention than the cherry tree it antedates. Yet the stars in their courses do not ineluctably dictate a government postal monopoly.

Early Americans saw these failures each day, so they became actors working for a change.

The United States has a long and healthy history of entrepreneurial disobedience. You can easily say that the individualistic rejection of force in the marketplace was one of the only real mechanisms of "checks and balances" that actually worked against government.

So opposed were people to these government-run postal services in the 1800s that a natural order kicked in where no jury would even think of convicting the private agencies — an "underground nullification," if you will. One of the first private American express firms was founded by William F. Harnden in 1839.

His business became very successful in the public eye, and the postmaster general, realizing that the competition hurt government revenue, began an investigation into its workings. Harnden wrote, in a letter to a Philadelphian business partner,

Receive nothing mailable. You will have no small number of Post Office spies at your heels. They will watch you very close. See that they have their trouble for their pains.

Since the service provided by Harnden's firm was classified more as "package protection" and less as "package shipment," however, there wasn't too much the government could do.

Eventually Harnden contacted Henry Wells, whose connection with Daniel Drew, a well-known steamboat magnate and competitor to Cornelius Vanderbilt, allowed for a network expansion between shippers. Henry Wells — with George E. Pomeroy and Crawford Livingston — hoped to be acknowledged as a legal alternative to the USPS, and offered to carry mail for a mere 20 percent of the government's then-current rate. The bureaucrats rejected the proposal but were subsequently forced to lower their own prices in fear of backlash from the general population in response to the detrimental protectionism.

Three years after the meeting between Harnden and Wells, individualist anarchist Lysander Spooner came up with his own plan to compete against the USPS through the creation of the American Letter Mail Company. Unlike his predecessors, Spooner didn't pretend to be in compliance with the government's postal monopoly. He made two arguments:

  1. the Constitution didn't openly ban private carriers from voluntarily serving customers, and
  2. he'd keep delivering the mail even if it was deemed illegal.

Spooner elaborated on the first point through his fervent pamphlet entitled The Unconstitutionality of the Laws of Congress, Prohibiting Private Mails. He writes,

If Congress cannot carry the letters of individuals as cheaply as individuals would do it, there is no propriety in their carrying them at all.…

By the old articles of Confederation, it was declared that "the United States, in Congress assembled, shall have the sole and exclusive right and power of establishing and regulating post-offices from one State to another throughout all the United States."

When the constitution came to be adopted, this phraseology was altered, and the words "sole and exclusive" were omitted. This alteration … must certainly have been intentional — and it clearly indicates that the framers of the constitution did not intend to give to Congress, under the constitution, the same "exclusive" power, that had been possessed by the Congress of the Confederation.

But this obviously purposeful alteration in wording didn't work well enough to convince the court system that his voluntary, high-quality business provided a legitimate service in the economy. In the words of Peter Schiff, "The government's going to do what it wants to do, and the courts are going to support that. The courts don't care."

Luckily for us, Spooner continued to successfully and cheaply deliver mail for seven years before the US government shut down his operation. The 12¢ stamps sold by the USPS were no match for Spooner's 3¢ stamps, so the US government, in order to oppose the inevitable, officially declared that all city streets were to be deemed post roads, available only to the USPS in letter delivery. (The disobedience led to Spooner's more radical work 23 years later, No Treason: the Constitution of No Authority, which argued for the Constitution's invalidity as a legal contract.)

Skip ahead to the 1900s and we see that the price of a first-class stamp increased 633 percent in only 27 years, and this number is supplemented by a 10 percent speed decrease in 15 years. One would assume that, with the invention of basic email in the late 20th century, carriers would feel a stronger need to reflect the quick pace allowed by technology; the government didn't. In a policy analysis for the Cato Institute, James Bovard finds,

In 1969 it required 1.5 days on average to deliver a first-class letter. By 1982 the average first-class letter required 1.65 days for delivery, and by 1987, 1.72 days. In the quarter of 1990 before the new standards were implemented, the average had increased to l.80 days. In the quarter after the new standards began to be implemented, the average rose to l.83 days — a 1.7 percent increase that makes current average delivery 22 percent slower than 1969 delivery.

And now we see the USPS in its saddest state yet. The 2000s have wrecked its only recognizable foundations. Nearly universal access is available to various kinds of communication, so it isn't surprising that letter carrying is becoming obsolete. I don't expect many carriers to continue business as usual, but it seems to me as if the government hasn't even realized that we're living in a new age.

For the past five years in a row, the USPS has had a negative net income in the billions with a record loss of $8.5 billion in 2010, up an entire $4.7 billion from the 2009 alone. These failings easily led to the organization's recent placement on the Government Accountability Office's list of high-risk institutions. Meanwhile, private agencies like FedEx and United Parcel Service are growing fantastically each year, even with the current restrictions set against them.

Earlier last year the USPS announced the closure of nearly 3,700 post offices across the United States in one last attempt to salvage its reputation, but the $200 million it will save stands insignificant next to its deficits. Not surprisingly, the postal-workers union isn't making it easy. While labor costs represent only 32 percent and 53 percent of expenses for FedEx and United Parcel Service, respectively, they represent an astounding 80 percent for the USPS. So why isn't this negative mechanism taken into consideration?

Murray Rothbard writes in Man, Economy, and State:

The inefficiencies of government operation are compounded by several other factors. As we have seen, a government enterprise competing in an industry can usually drive out private owners, since the government can subsidize itself in many ways and supply itself with unlimited funds when desired. Thus, it has little incentive to be efficient. In cases where it cannot compete even under these conditions, it can arrogate to itself a compulsory monopoly, driving out competitors by force.

And we clearly see this phenomenon in the case of the post office. Instead of facing the real issue at hand, executives at the USPS are focusing on $50 million in "stolen items" (a mere 0.5 percent of the 2010 annual deficit) that they'd like thieves to please return. We can only hope that the post office's decision to eliminate next-day delivery for first-class mail will infuriate people to the point of paying attention to the root conflict.

It's pathetic that a government-enforced monopoly continues to lose money.

In every facet of its business, the USPS has either been a failure from the get-go or its value has now been swept under the rug by newer and quicker streamlines in communication. In either case, to echo Spooner, it is unfit to exist. Congressional action needs to strip down and cease the enforcement of every last private-express statute in the legal code.

Neither snow nor rain nor heat nor gloom, only privatization can keep these couriers from being replaced by real choices in the free market.

Note: The views expressed on Mises.org are not necessarily those of the Mises Institute.

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