John Singleton with Bob Howard, Rip Van Australia (Stanmore: Cassell Australia, 1977), pp. 197-202, under the heading “Post Office”.
The United States Post Office was organised in 1789.
It went $40 in the hole that year, thereby establishing
one of the most venerable of American traditions.
WILLIAM C. WOOLDRIDGE
Nowhere is there a better example of the evils of a coercive monopoly than our postal system — Australia Post and Telecom. The service is abysmal, the price exorbitant and competition is forcibly prevented.
The Australian postal service, begun in 1809, and telecommunications service, begun in 1854, have grown to enormous proportions. Figures quoted in the Vernon Report of 1974 showed that by 30 June 1973 the total workforce of both services was 130,372 people — or about 45 per cent of total Federal Government employment. Figures quoted in the report showed that in the period from 1959-60 to 1972-73 the postal service accumulated losses of $149.2 million, while the telecommunications service accumulated profits of $286.3 million (approximately half of which came in the years 1971-73 as a result of increases in telephone fees). The latest figures quoted in the report showed a postal service loss of $20.9 million for 1972-73. By 1974-75 this had grown to an annual loss of $64.6 million. Then, the Post Office tripled its prices and halved its deliveries simultaneously and these measures resulted in a $31.7 million profit for 1975-76, the first profit since 1963-64. Telecom on the other hand, showed a $62.1 million profit for 1972-73, and this grew to $95 million for 1974-75.
These figures prove the reaction of Australia Post to its rapidly increasing losses was one that only coercive monopoly could contemplate: a reduction in service and a huge increase in fees. Did it have any alternatives? If so, wouldn’t the Vernon Committee Report have considered or recommended them?
Unfortunately, the operations of committees such as the Vernon Committee are reminiscent of the drunk who lost twenty cents in a dark street. Rather than hunt about for it, in the dark, he moved on up the street and proceeded to look for it under the street light, because the light was better there.
There are certain limitations, both explicit and implicit, that govern such official enquiries as the Vernon enquiry. They accept certain basic premises, and try to find a solution based on them. But if the fault is in the premises, they indeed have as much chance of success as the drunk looking for his money. They are both looking in the wrong place.
The one thing the Vernon Committee did not recommend, and should have recommended, was that private enterprise be allowed to compete in all areas covered by Australia Post and Telecom. One obvious reason for this is the one that has been continually cited in this book — the government had no right to prevent private individual from such competition. Indeed, the government has no right to be involved in postal and telecommunications activities at all. The function of government is to protect individual rights. Full stop. Not only does its activity in postal and telecommunications services lie outside this proper function of government, but by maintaining a coercive monopoly on it the government becomes guilty of violating the rights of its citizens — for example, it forcibly prevents people from competing, and inflicts penalties on those who insist on trying.
We fully realise, however, that such more arguments won’t convince many people. Yet. For anyone who appreciates principles, these arguments would be sufficient, but today we live in a world of pragmatic crackpot realism. Thus, to prove our case, we need to show that such private competition is practical. One frequent argument put up is that private companies would simply skim off the cream, and leave the government services with only the non-profitable areas to operate, and in fact this probably would happen. It would happen because of the strange notion the government has that everyone in Australia should, for example, be able to post letters to anyone else in Australia for the same fee. Thus, if you live in Birdsville, you post letters to Sydney with the same eighteen cent stamp as someone in Sydney uses to send a letter across the road. No private company could afford to run a postal service to remote places like Birdsville while charging such unrealistic rates. If it was forced to charge such rates then it would not provide the service.
It is argued that postal services are “social services” and should not necessarily be run at a profit. This means, in plain language, that some of us should be (and are) forced to subsidise the mail of some others. In other words, city people could have their mail delivered at far less than eighteen cents a letter, but the costs for country people would be far higher. So, city people have to subsidise the services to the country. But, as we know, everyone pays the same rates. But why isn’t this fine egalitarian principle applied consistently?
Why don’t we also charge the same airfare for trips all over Australia — Sydney to Perth to cost the same as Sydney to Melbourne, for example? Or have all telephone charges, local and trunk, at the same rate?
The Vernon Report gives some figures as of 30 June 1973 for the breakup of Post Offices.1
Area | Population | Post Offices | Ratio of Post Offices to Population
Metropolitan | 7.9 m. (61%) | 1669 (26%) | 1 : 4700
Large Urban | 1.4 m. (11%) | 412 (6%) | 1 : 3400
Other Urban | 1.9 m. (14%) | 825 (13%) | 1 : 2300
Rural | 1.8 m. (14%) | 3628 (55%) | 1 : 500
Totals | 13.0 m. | 6534 | 1 : 2000
These figures show that country areas have 55 per cent of the Post Offices, but only 14 per cent of the population. The other 86 per cent of the population subsidise, to varying extents, these country people’s mail. Unfortunately, the Report gave no breakdown of the spread of business and profits/losses across the four categories, and we were unable to locate these figures elsewhere.
The Vernon Report, however, did give the figures for the telecommunications operations for the year 1971-72. The “Basic Telephone Facility” showed a profit of $48.4 million in the metropolitan areas, a loss of $23.7 million in country areas, and a loss of $29.5 million in rural areas — or a total non-metropolitan loss of $53.2 million. “Untimed calls” showed a profit of $27.3 million in metropolitan areas, and a combined loss of $35.7 million in country and rural areas. Trunk and STD calls on the other hand, where the increased distance/increased price formula is used, showed a $113.8 million profit.
An example of how private enterprise could handle remote areas is to be found in the history of private mail services in California from 1849 to about 1881. Those were the days of the California gold rushes. There was a large population and virtually no government postal service to the area. As William Wooldridge cites: “Depending on the authority whose count is accepted, from 546 to 775 separate private expresses carried on their business in California at one time or another, together providing, by the almost unanimous testimony of all who have left reports, better service than the government.” Indeed, Wooldridge notes that the U.S. Postmaster General in 1853 reported with discouragement to the President: “The habit of relying on the expresses is continued long after the Post Office and the mail route have reached the neighbourhood.”2
In the 1840s, the U.S. Postal Service was so bad that all over the country private express companies were started to carry the mail — Wells Fargo being one famous example. Starting in 1839, they had by 1845 captured from one third to a half of the total postal market — and this, while being illegal (as fast as the carriers were caught and jailed, irate local residents bailed them out). These private services brought the U.S. Government service to the verge of extinction and forced the government to reduce its postal rates to one eighth of their former maximum. It was this huge reduction (with consequent losses financed by taxes) that finally drove the private carriers out of business. It has been estimated, however, that in 1845, private carriers transported 15,500,000 of the 42,500,000 letters carried that year. Henry Wells, later of Wells-Fargo, had a Philadelphia-New York express that charged, in 1843, six cents a letter, compared with the government’s twenty-five cents. In some places, in order to get around government red tape, users of the private expresses put government stamps on their letters and then paid the private carriers to deliver them. At one time, they were paying three cents for the stamp and a further nine-and-a-half cents for the carrier — eloquent testimony to the enormous dissatisfaction with the government service. The service the private companies offered, even in those relatively primitive times, was astounding. Blood’s New York Express, for example, was offering five collections and four deliveries a day. The only reason the U.S. Post Office still exists, and the only reason ours still exists, is that the government has legislated all competition out of existence.
Because dissatisfaction with the U.S. Government Service is again getting beyond tolerance levels, private competition is once more napping at its heels. The private United States Parcel Service carries over half of the parcels delivered in the U.S. today, and makes a profit, whereas the government makes losses on the same service. (In fact, the U.S. Post Office loses a total of over $100 million a month on all its services!) United Parcel’s prices are lower, delivery times are shorter (for a 2.25 kg package, San Francisco to Seattle: U.P.S., seventy-four cents and two days; U.S. Government, ninety-five cents and seven to ten days — figures for 1968). U.P.S. pays taxes, and still makes a profit.
The Independent Postal System of America started up in November 1967, and by April 1968 had made its first profit. By mid-1969, I.P.S.A. was delivering mail in twenty-eight states in the U.S.A. It can only deal in second, third and fourth class mail, must pay taxes, must start from scratch in purchasing buildings, equipment and other materials, and must go through an enormous number of of convolutions because of bureaucratic red tape. For example, the U.S. Government has decreed that it owns all letterboxes, even though they were purchased and installed by private home owners. The I.P.S.A. is not allowed to deliver mail into those boxes and instead has to leave it elsewhere. So, I.P.S.A. hangs it on the door-knobs in plastic bags. The bags cost (in 1970) about seven dollars per thousand, and returned about ten dollars per thousand when the advertising space on them was sold. That’s why private enterprise makes a profit and the government doesn’t.
I.P.S.A. and others have repeatedly approached the government with offers to deliver first class mail (normal letters) and have been repeatedly refused. They have offered to do it at vastly reduced rates, and with better service. Why are they turned down, and how can the government then say that it has the “public interest” at heart? Political reasons are the answer — the enormous vested interest system created by the U.S. Post Office; from the post office bureaucrats down to their suppliers. Too many votes there for the government to risk. But as the government system continues to deteriorate, that may come to be the lesser of the two evils.
There is the additional factor, too. Controlling the mail does give the government more power. For example, censorship has been imposed by banning books and magazines from the mail, and the opening of mail by government intelligence agencies is easier with a government mail system.
Further evidence of the superiority of private enterprise can be gleaned from the operation of telephones in the U.S.A. While in no way openly competitive or in any way real free enterprise, it is still a superior service to that provided by our government. Same day telephone connection, a wider range of equipment and payment schemes and overall very much lower charges are some of the features of the private U.S. phone system. It is interesting to contemplate what the figures would be for Australia Post and Telecom if they weren’t exempted from income tax, local government rates, payroll tax, sales tax, customs and excise charges, and motor vehicle registration charges.
These operations, post and telecommunications, could be taken over by private enterprise. On 30 June 1973, according to the Vernon Report, the total assets of Australia Post were $180.8 million and Telecom $3203.9 million. These sort of figures are not out of the range of private enterprise, especially since the service could be taken over in a number of different sections. All the government has to do is to allow competition, and remove the competitive advantages from its own service. Then the best will out. When it does, we’ll all be much better off. Just about everyone who has ever been into a post office, or has been through the hassle of getting a phone connected, knows what their main problem is. To once again quote the great English philosopher and sociologist, Herbert Spencer, when State power is applied to social purposes, its action is invariably “slow, stupid, extravagant, unadaptive, corrupt and obstructive.”
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