Privatize the Post Office, Authors Urge

May/June 1996 • Policy Report

“The case for privatizing the Postal Service is clear,” writes Cato’s director of regulatory studies Edward Hudgins in theintroduction to the new Cato book The Last Monopoly: Privatizing the Postal Service for the Information Age. “ThePostal Service survives through sheer political power, not through its ability to satisfy customers. As the country moves into the21st century, and as policymakers attempt to restore economic liberty, those policymakers should show the courage to abolishthe last monopoly and privatize the U.S. Postal Service,” says Hudgins.

The essays in this book are grouped by topic, starting with “The State of the Postal Service.” Postmaster General MarvinRunyon writes that universal, government‐backed mail service is necessary but concedes that introducing standard businesspractices to the Postal Service will begin to remedy its flaws. He argues for the “right amount of deregulation” of the PostalService–but not complete privatization.

James I. Campbell Jr. traces the history of the postal monopoly, and Peter Ferrara argues that the inherent problems of thegovernment postal monopoly have resulted in rates as much as 50 percent higher than they would be if competition wereallowed. Gene Del Polito advocates fundamental change in a postal system that rewards laziness, punishes efficiency, and iswont to implement periodic “Band‐Aid” solutions that fail to cure the disease of monopoly.

In Part II, “Competing with the Post Office,” Thomas M. Lenard and Stephen L. Gibson examine the efficiency and low costsof private delivery firms and the new technologies of the telecommunications revolution, respectively. Thomas DiLorenzoconsiders the “natural monopoly” myth about the Postal Service and concludes that mail delivery would be less costly andmore reliable if the Postal Service’s monopoly were eliminated.

In Part III, “Market Structures for Private Delivery,” R. Richard Geddes analyzes the results of a privatized system andconcludes that “consumers would have even greater choices in the speed of delivery and price levels to suit their needs.“Michael A. Crew provides an international perspective in his essay; noting that most industrialized countries are moving towardmarkets in postal delivery, he argues that high labor costs and access to established postal networks will be the primaryproblems in a move toward privatization in the United States. Former senior assistant postmaster general Murray Comarowrecommends that a commission analyze problems and recommend changes in the Postal Service but cautions againstimmediate moves toward privatization before the details of such a system are fully examined.

The last part of The Last Monopoly examines two very different plans for privatization. Rep. Dana Rohrabacher (R-Calif.)suggests making the Postal Service an employee stock‐ownership company, giving employees the opportunity to profit from acompetitive private firm. Douglas K. Adie’s solution is to break up the Postal Service into regional divisions (similar to theAT&T’s breakup into regional Bell telephone systems). A holding company would control the divisions until they were sold offand take other transitional steps to full privatization.

The Last Monopoly, which includes revised versions of papers presented at a June 1995 Cato conference on “Private PostalService in the 21st Century,” puts the debate over postal privatization in perspective and provides a variety of insights into thespecific problems to be solved by a free market in mail delivery. As editor Edward Hudgins writes, “The burden of proofshould be on those who would retain the postal monopoly. The correct question to ask, then, is not, ‘Should the Postal Servicebe privatized?’ Rather, [it] is, ‘Is there any compelling reason for maintaining the postal monopoly?’ ”