Jewish World Review May 16, 2003 / 14 Iyar, 5763

Max Pappas

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Consumer Reports


If you don't think privatized mail works, ask Sweden, Germany and Australia


http://www.jewishworldreview.com | As the President's Commission on the U.S. Postal Service desperately seeks a way to stop the agency's financial nosedive, it ought to reach out and grab the hand brake of privatization.

If it foregoes the privatization solution, the commission is left only with firebreak reforms that won't cause the necessary long-term changes that powerful market forces will bring.

As many other countries have already realized, taking away a post office's monopoly and turning it into a real business is the most effective and potent option available.

Postal liberalization has happened in New Zealand, where stamp prices went down, and in Australia, where on-time delivery went up. It's won plaudits in Sweden, where there's now competition even in remote hinterlands, and in Germany, where Deutsche Post is taking advantage of globalization and expanding into international markets.

There is no good reason the U.S. government has to run the post office. It's not the Army. It's not the police. It's an old-fashioned way of sending e-mail. And it's barely that anymore.

A recent Postal Service study says personal letters make up just 5.6 percent of our mail. Advertising/junk mail, however, is almost 60 percent. Does this remind you of your e-mail inbox?

As the privatized Deutsche Post has shown, the Postal Service could do much better than being a multi-billion dollar ad agency. Service may have improved over the last 30 years, but the Postal Service is $11 billion in debt and is seeing decreased demand for money-making first-class mail thanks to fantastic technological innovations from the private sector.

It has invested heavily in automation, yet struggles to improve efficiency, can't seem to reduce labor costs, and doesn't capture potential savings from bulk mail discounts.

The Postal Service has acknowledged its problems, issuing a transition plan and vowing to "improve value to our customers, enhance operational efficiency and foster a more performance-driven culture."

In other words, begin running itself like a business. But new business plans and improved management schemes won't make it a business anymore than having a "business model," adding "CEO" to the postmaster general's title and switching its Web address from USPS.GOV to USPS.COM has in the past.

This sort of fiddling around the edges fails to get at the core problem - that the Postal Service is a government entity. It will only be a business and operate like a business when it faces the possibility of going out of business. It will be a business and perform like a business when owners and employees gain when the post office does well and suffer when it does poorly. It will be a business and act like a business when it celebrates serving 1.7 million new addresses every year, instead of equating customer growth with financial problems.

Bureaucratic reform can't make this happen. But competition and the removal of its monopoly can.

There are fears that a competitive system of private companies won't deliver to rural areas. But the Postal Rate Commission itself found loss-making rural routes constitute "only 2.5 percent of all addresses served." Serving these routes results in a loss of just $121 million or 0.3 percent of the USPS' total expenditures.

New tax revenue gushing in from the formerly tax-free $65 billion mail industry would easily cover any subsidies needed to make such deliveries at the going urban commercial rate.

Former Postmaster General William J. Henderson said, "We will lose this monopoly. It's happening all over the world."

The president of the American Postal Workers Union called the commission "a thinly veiled attempt to dismantle the Postal Service as we know it."

Let's hope they're both right. ___



Max Pappas is an adjunct fellow at the Lexington Institute. Comment by clicking here.

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