Yield to government the monopoly over the issue and supply of money, and government will inflate that supply to its own advantage and to the detriment of the politically powerless. Once we adopt the distinctively Austrian approach of “methodological individualism,” once we realize that government is not a superhuman institution dedicated to the common good and the general welfare, but a group of individuals devoted to furthering their economic interests, then the reason for the inherent inflationism of government as money monopolist becomes crystal clear.
~ Murray Rothbard from "The Austrian Theory of Money" (.pdf)
As I (sort of) expected, my postal competition essay generated a lot of interest. Wait, I'm lying. I never expected it to generate that much interest! Frankly though, I did ask for it. The issue seemed basically cut-and-dried and the points I made were largely obvious, or so I thought. The USPS is protected from competition (in first-class mail) by fiat.
This is a direct result of legislation, which has, at its root, a desire to protect the Service from competition. People such as Lysander Spooner, et al., have challenged this monopoly more than once, with varying degrees of success. Generally, when they failed, it was because of the imposition of fines.
In my essay, I wondered what might happen if that "protection" didn't exist, while positing some possible outcomes. Debating those outcomes is always fun, but it's not really what we should focus on. (One point does deserve a quick mention, outside those I discuss below. In my original piece, I mentioned that mailboxes appear to be positioned at the convenience of the carrier. This is not true. They are positioned at the convenience of the Service, which is exactly what one would expect! Of course, this is still antithetical to what could happen in a free market situation. Many thanks to the respondent – a postal carrier – who pointed this nuance out.) We are and should be, focusing on the State, not any of its victims.
The bulk of the feedback to my piece, once I dug a little deeper, and once I got past a couple of ad hominem attacks (including at least one mention of my apparent mental retardation) was more about larger – much larger – issues than the post office and whether or not it is well run. Those larger issues, many of them raised by astute postal employees, were (and are) about freedom and what it really means. It is those larger issues that make Rothbard's quote above so germane. While we're talking about delivering a service versus controlling the currency, we are still talking about a monopoly, and what a government-sponsored monopoly means to freedom.
Let us be clear. With kudos to Marc Stevens for originally using this metaphor, delivering any service at the barrel of a gun – which is how all government services are delivered – is immoral. (It doesn't matter if the service is delivered directly by a government agency, or by an agency that operates under government authority and/or heavy regulation.) This issue is morally clear no matter how much anyone likes that service, or how many people ostensibly benefit from that service, or how widespread that service is, or how long that service has existed.
The bottom line is: If your service is so great, you should be willing to deliver it voluntarily, without government protection or legal requirement. Furthermore, the fact that something "good" comes of your initial act of aggression is irrelevant.
As I did once before, using an information technology motif, and mining the responses for common themes, I have prepared a "Frequently Asked Questions" (FAQ) list.
Question # 1: What about all the people who live in far-away places?
Answer # 1: This excellent question, by far the most often asked, is really about the concept of Universal Service, which while codified in the laws that protect the USPS, also requires it to provide a particular type of service. Simply put, it is mandated by law that everyone, no matter where they live, must be covered by postal service, at a price that is "equal" to that of all other regions. Quoting from the USPS Transformation Plan (.pdf), we have:
[The] universal service obligation, or USO, as summarized in the Postal Reorganization Act of 1970, requires the Postal Service to "provide prompt, reliable, and efficient services to patrons in all areas and…render postal services to all communities" at "fair and equitable" rates. The Act further requires the Postal Service to "receive, transmit, and deliver throughout the United States written and printed matter, parcels and like materials…"
A very similar requirement exists in the UK. Given that so much of the U.S. is rural, this puts a considerable burden upon anyone who would deliver mail. I could analyze this requirement further, but that strikes me as unnecessary, particularly given the basic premise that any service, no matter how humane, that is funded via theft at the barrel of a gun is immoral and cannot be otherwise.
Where I might choose to live is my decision and my decision alone. (Well, actually, my wife decided, but I helped.) Mail delivery is simply another factor in that choice, much like access to water for recreation, access to roads for travel, access to shopping malls for, well, shopping, or the access to plentiful and affordable adult beverage vendors. If the State cannot offer me a service without infringing upon the rights of others – it never can – then I cannot support that service.
It is also worth noting from where the initial driving forces for the USO arose. A wonderful historical piece from the Cato Journal, on the economics of the Post Office during the time of 18391851 (.pdf), goes into some detail regarding how private companies challenged the Post Office, offered better services, and forced lower prices. This quote from that piece is instructive:
The subsidy of rural routes excited much controversy. Living in thinly populated areas entails higher transportation and communication costs. It is a common government policy to subsidize the higher rural costs. High-volume routes between the cities and large towns of the Northeast made sizable profits that were partially spent by politicians in creating and maintaining unprofitable low-volume routes for rural voters.
Basically, politicians, looking to "buy" votes from rural voters, used the monopoly of the post office to do so. (This is about as surprising as finding a roach that likes garbage. As I've said many times about the State – second verse same as the first.)
Additionally, one could argue – and many respondents did – that because of the lack of a universal service requirement, competitors of the USPS can enjoy market segments that are high margin and leave the "grunt work" to the USPS. I have little doubt that this is true, but my suggestions are, have been, and will be, for truly free markets in all things. Either we want socialism or we want freedom, but we can't have both.
Question # 2: Don't you know that the USPS (i.e., nationwide mail delivery) is mandated by the Constitution?
Answer # 2: The number of times and the passion with which this was said were truly epic. While similar to the universal service objection, this point is also different as well. Certainly opinions differ, even here at LRC, about the Constitution's applicability to an anarcho-capitalist society. One particularly astute respondent provided some fascinating information and called upon the hallowed name of Benjamin Franklin, who apparently set up that first post office to "guarantee that people could communicate with each other without worry." Here is a pertinent quote from a historical piece on the early post office:
Mr. Franklin was well aware of the importance of post offices and the delivery of mail and saw to it that this vital system to a new government would be protected. The Constitution of 1789 mandated the establishment of post offices and post roads. Congress made the U. S. Post Office a part of the federal government. President Washington appointed Samuel Osgood as the first postmaster general.
I haven't a clue why Franklin believed what he did, but I'm not sure that matters much in this case. The Constitution may or may not be a fine document, but again, I'm not debating that point. Just by virtue of the fact that something appears (or does not appear) in that document says little about its truth or falsehood. The fact that a Founding Father believed or did not believe something is also largely irrelevant.
As a proponent of market anarchism, my preference is, again, for truly free markets – as driven by universal morality – regardless of what we may have had, what we have, or what certain people seem to enjoy.
Question # 3: Haven't you heard about all the places that already tried "privatization" with poor results?
Answer # 3: This comment probably ranks third, just behind universal service and the Constitution, in passion and the number of e-mails its proponents were willing to send. There are examples, of differing applicability, on both sides of the question.
One respondent mentioned Sweden, and noted that while the technology had improved, he was unsure that the consumer had really seen any benefits:
If you want to study how such a market changes as private companies are allowed to enter the market one could study the Swedish market, which was first in the world to get rid of the monopoly. Now, since 97, we have the “royal mail” and CityMail ® who compete for market share.
For business[es], the introduction of CityMail ® has meant a lot as the royal mail and CityMail ® now are competing. There has been great advancement in technique for reaching out to the right customers by using computer programs and information from different institutions (all information that can be found in the Swedish authorities is public in Sweden, i.e. all IRS information and such). So the introduction of the private company has led to better ways for advertisement to reach the right customers, but this far the consumers have had little or nothing to gain.
Another respondent mentioned New Zealand, and related the relative success they have experienced after government privatization of the postal service:
In New Zealand now, you get a choice of 4 or 5 differently colored mailboxes to use and several postal providers franchise their customer service to retail stores such as cafes. [There has been a] decrease in the cost of a 1st class stamp from 45 to 40 (35US to 30US).
Note [that] any company or individual can legally operate a business delivering letters. [Also note] the fact that twenty-three (23) other postal operators were registered [after privatization.]
Some of the special services that [are now] offered are non-standard mail shapes (coconut mail, voicemail, i.e., singing telegrams for the blind), scanning and emailing receipt / printing and sending of mail, fax interface to mail etc.
That scenario seems to be playing out to the advantage of the consumer. Yet another respondent mentioned the Netherlands and gave examples of all the ways the market can respond negatively (or unexpectedly) to incentives generated by privatization efforts of the State:
We do have competition in postal services here in the Netherlands; it [results in] several problems you should take into account:
- One company starts competing [by] delivering post only once a week and takes all profitable parcels; the other companies lose business, service drops, prices go up; or,
- One company starts paying not minimum wage but a "by-parcel" system. Competition has to lower wages [in response] or they can't compete; or,
- New startup companies "pick cherries." (Picking Cherries: Slang for a company competing only in the profitable business sectors while the company with which they compete is forced – usually by government edict – to continue the non-profitable sectors.) This decreases available services; more expensive services become unprofitable and are dropped.
- Postal offices lean down, become smaller, and lay off people. What they can automate is automated, or services are simply no longer offered. Lines *do* become longer.
All in all, what we [have] seen so far is that competition has not been entirely favorable. It looks like results of competition in basic services are ambiguous.
On the one hand, these results point out a basic truth: if you've still got government control, you don't have a truly free market. (New Zealand still sounds like they're doing pretty well though!) Each of these examples still has varying degrees of government involvement in the delivery of mail. It is no surprise when the effects of partial-privatization are unexpected or sometimes even negative. (This is why "deregulation" of energy in California was so bad, not because of the market.) However, I'm not suggesting "reform" of the postal laws, or "partial privatization" of the postal service. I am positing the likely positive effects of a truly free market on that enterprise.
On the other hand, and most likely, many, if not most people, particularly those used to State control, simply do not trust the free market. This is a common situation. I attempted to address such mistrust in my third essay ever at LRC when I said:
The market works just fine without help. This is the one libertarian premise that often gets the most push-back from those who “know” that without help, or control, or rules and regulations, some evil person somewhere will take advantage of the unwashed proletariat, make a ton of money, and dump the resulting toxic waste into the nearest aquifer – probably while driving an SUV, twirling his handlebar mustache, and smoking an unfiltered cigarette. (Snidely Whiplash lives!) I openly admit that I believed this until I spent just a few years running my own business. Few endeavors can put misplaced incentives and ham-handed charity into plain view and perspective like full-contact entrepreneurship – in my case, owning, rehabbing, and managing inner city rental property. Rather than spend one more moment regaling you with my own hard-learned lessons, I recommend that anyone with any questions in this arena begin by consulting none other than Murray Rothbard via an article entitled, appropriately enough, “What Is the Free Market?” If Rothbard cannot convince you, then I am, and likely have been, wasting both your time and mine.
Indeed. I'll take the free market every time, if given the choice. Right now, we don't have that choice.
Question # 4: What's so bad about junk mail?
Answer # 4: This is another great question. The analysis from my respondent was so good, I will quote it for all to enjoy. He began:
I disagree with your analysis about junk mail. The sender is any postal service’s customer. The recipient is simply the service they provide the sender. The recipient rarely spends anything to receive his mail. The sender pays the bill. I think there would be a lot more junk mail as postal services tried to maximize profits by delivering as much mail as possible.
It's hard to argue with that. He goes on:
Imagine if a postal service offered a junk mail sorting service. They would essentially not deliver certain types of mail to customers that didn’t want that type of mail. There would still be a market for advertisers to get advertisements to these people. A competitor would offer an unfiltered service at a cheaper price because they wouldn’t have to sort the mail, and soon you would be getting more junk mail than ever and the first company would go out of business.
Indeed. The person who sends junk mail is simply a customer, and as such, is paying for the opportunity to send "junk" to any recipient for whom he has an address.
As I told my respondent, that's good stuff! Junk mail is simply a need being met by the market. People want to sell things. They pay for advertising, which includes mailing circulars to possible customers. Customers' reactions provide a response to those mailings. The fact that the junk mail, including spam, continues to be sent illustrates logically that it works!
Quoting this respondent one last time, "So, as much as I hate to say it… Long live junk mail." I can't argue with that, and little more need be said. (I still hate spam – and who doesn't – but if it didn't work, I likely wouldn't be getting any.)
Question # 5: How can you expect the USPS to become private when the IRS, DOJ, and other government agencies use it for free?
Answer # 5: This is a subtle point that I had not directly considered. It actually points to yet another reason why allowing the gubmint to run things always results in additional costs for the consumer. Allow me to quote my respondent directly:
The postal service will forever remain because of at least two government agencies: the IRS and the US Armed Forces. The IRS will continue to exclusively use the USPS for tax purposes as it’s secure and reliable. US army bases exclusively use the USPS as it is reliable for overseas servicemen to receive mail and correspondence.
He makes a valid point, to be sure. Here's the thing though. I don't think the IRS, the DOJ, and the Armed Forces, etc., should exist either! (Note my previous and oft-repeated stance on market anarchism.) As such, I'm not worried that other gubmint teat suckers will lose their "most reliable" method of shipment. I don't mean to be flippant, but they're wasting my money too.
Another somewhat related issue in this area is the ways the appropriations I previously mentioned were actually used. Various respondents corrected me by saying that any money the USPS receives from Congress generally goes to pay for "franking" of Congressional mail, among other things. (Franking: Stamping a letter with a special machine, so that it doesn't require a stamp to be delivered.)
In essence, the members of Congress get to mail stuff for free, and they eventually (or occasionally?) pay for that service after the fact. Call me crazy, but since all money spent by the State originates with – is stolen from – taxpayers, what that money might be called on "the books" is largely irrelevant.
Question # 6: The price hike was only $.02 – isn't that a bargain?
Answer # 6: This question or objection was covered, or so I thought, in my initial essay. I'll cover it again, just for completeness.
I haven't a clue what a "reasonable" price is, and neither does anyone else, since we've only got the legally-mandated options. (I do find it interesting to note that in almost every historical case, outside competition did drive prices down.) With apologies for appealing to authority, Mises already wrote pretty extensively regarding the fact that economic calculations are impossible under socialism. In analyzing another government intervention of the free market – national parks – Manuel Lora explained the economics of this situation quite fully:
Whenever there is an exchange of goods, those who are engaging in it are ex ante better off than they would have been had they not traded; they expect to benefit from the exchange or they would not be doing it. If A is buying apples from B for $1, then A must necessarily value the apples more then he values the dollar. A similar thing happens with B, who thinks that the value of the dollar is greater than the value of the apples. Free exchange is therefore a double inequality.
Under government intervention, however, the relationship between those exchanging goods is no longer as it is described above. Instead of two parties freely deciding to exchange goods based on their needs and calculating through prices, the government is the one that gets to set the terms, unilaterally. It allocates resources according to the political climate, neglecting the needs of everyone by proposing and establishing one-size-fits-all schemes. Instead of both parties being better off, one (usually the politician or lobbyist) becomes better off at the expense of the other.
Indeed. This type of thinking – that the State can properly set a "good" price – reflects a basic misunderstanding of economics, much like saying that $X is a "rip-off" for hotdogs at a baseball game. Here's a lesson I stole from Gene Callahan's excellent Austrian economic primer, Economics for Real People: If you've a choice then you can't get ripped off. Conversely, if the buyer has no choice, calling any price a bargain is rather problematic. Supply and demand drives the seller to set the price at the highest point where sufficient – whatever that means to him – sales will occur.
What an interesting subject! More importantly, this is a subject that crosses many lines of fact, perception, and belief. As I mentioned in my opening paragraphs, this issue is morally clear no matter how much anyone likes a government service, or how many people ostensibly benefit from that service, or how widespread that service is, or how long that service has existed. No one can morally deliver a product or service at the barrel of a gun.
Some may feel that even if the State takes an immoral action, some good can still come of it. That doesn't make it moral. To use a Walter Block example: If I kidnap someone, I am a villain, and I have infringed upon his or her life and property. If it is later found out that as a result of my kidnapping my victim does not die in an accident that would otherwise have claimed their life, am I somehow less of a villain? No. Just because I like the result doesn't make the approach with which it was delivered morally justifiable.
Some may feel that if the State uses its overwhelming advantage of force to noble goals, few should complain. I disagree. To use a Walter Williams example: If I approach someone on the street and ask for a donation to help fund a loved one's surgery, I am submitting myself to his or her charity and any money I receive is moral. On the other hand, if I approach someone on the street for the same purpose, but I'm holding out a gun, I really can't call it charity or moral even if it is collected for the same purpose.
Regardless of one's opinion about the USPS, it must be made clear that the free market drives innovation better than can ever be accomplished by government fiat. Let us end by consulting the Cato piece again.
The pressure of competition from private firms was responsible for bringing about lower postage rates. It was also responsible for changing the nature of postal service. Private companies introduced payment-by-weight, prepayment, postage stamps, and home delivery to the American market. Those reforms were adopted afterward by the Post Office.
We also find:
Besides driving down Post Office prices, private companies introduced a number of reforms that originated in Great Britain. Private mail companies first introduced to the United States the practice of charging mail by weight.
Finally we end with:
The effect of private competition went beyond the drop in postage rates. An equally important effect was the introduction of new techniques into the U.S. market. The most important innovations were prepayment with stamps and intra-city pickup and delivery. The Post Office showed no sign of adopting such innovations until they were successfully used by private companies.
Indeed. The free market is the means by which innovation and cost-effectiveness best occurs. So it was. So it is. So it shall be.