Privatize the Postal Service


Dear Mr. Potter:

Congratulations on your appointment as the next postmaster general. You takethe job at the most critical time in the history of the U.S. Postal Service.And you have an opportunity to be a true American hero, to change the USPSfrom a money‐​losing and maligned monopoly established in the 19th century into an efficient, innovative private company providing 21st‐​century services.

As a 23‐​year postal‐​service veteran, you know better than anyone that evenwith a monopoly on first‐ and third‐​class mail, the organization you headfaces competition from express carriers, faxes, e‑mail and the Internet. First‐​class mail, the major USPS cash cow, is stagnant. More people in the future will be paying bills electronically, further reducing postalrevenues. The postal service will lose more than a billion dollars every year for at least the next decade.

You know that in spite of billions of dollars of investments in high‐​techequipment, postal service productivity has risen barely 12 percent over thepast three decades. You know that the dysfunctional labor regime makes theefficient use of workers difficult, and cost cutting even tougher. You knowthat good managers are frustrated by restrictions on their authority to copewith bad workers. You also know that good workers are frustrated by badmanagers and by slacker colleagues who place a greater burden on theirshoulders. What’s more, you know that customers are frustrated by risingrates, long lines at the post office, and the threat of reduced service.

You know that the postal service’s attempts to generate new revenues byoffering new e‑commerce and electronic services face two problems: The USPSoften loses money on such ventures; and those ventures are inherently unfairto private providers because the USPS pays no taxes, is exempt from mostregulations that burden those providers, and has regulatory authority that it can use again its competitors.

So why not do the right thing? Announce that you want to manage thetransition of the U.S. Postal Service from a government monopoly to aprivate enterprise.

Think about it. As a privately owned company the postal service will havethe flexibility to manage costs and employ workers to provide efficient,cutting-edge, integrated delivery and communications services. Also, as abusiness that must compete for customers and satisfy shareholders, thepostal service no doubt would experiment with new services. For example, since the 1970s it has used cluster or roadside mailboxes for new dwellings rather than boxes at the door. Perhaps some people would pay a little more so that grandma doesn’t have to walk two blocks through the rain or snow just to retrieve her mail.

Owners of local post‐​office franchises might make creative uses of mailtrucks during typically idle evening hours, perhaps delivering groceries orother items for local merchants. Those trucks are capital, and if they cangenerate more revenue and jobs while providing services to customers,everybody benefits.

So what about the nearly 900,000 workers fearing lay‐​offs? Well, DeutschePost in Germany has reduced its labor force by one third over a decade,mainly through attrition and early retirement, before making a stockoffering to the public as it embarked toward privatization. But largereductions might not be necessary. Five years ago AT&T planned to lay off40,000 workers (in the end it didn’t). But of more interest was job creationin other telecommunications enterprises and sectors over the prior decade:MCI grew from 12,000 to 48,000, Sprint from 27,000 to 52,000, the number ofcable operators and programmers from 24,000 to 112,000. You get the point​.In a dynamic sector new job creation dwarfs job losses in any particularenterprise.

As postmaster general you should tell the administration and Congress thatit’s not a question of “whether” to privatize but “how.” The German modelis a good one. Perhaps you could emphasize an employee stock‐​ownershipoption to give workers a stake in the private postal service.

The crisis at the postal service will only grow worse in the future. Waitand the task will be tougher. Start now and you could create a dynamic21st‐​century company and serve as an example of an entrepreneur working forcustomers and shareholders – rather than as a bureaucrat protecting the turf ofa dinosaur.