Time To Privatize Daily Mail Service: USPS Loses Another $740 Million

On one hand, the U.S. Postal Service is supposed to function like a business. On the other hand, Congress won’t allow it to cut costs and services that don’t make money, as a business would do to survive. The result isn’t surprising. USPS lost another $740 million in the third quarter, despite making cuts here and there. The folks who run it want to end Saturday mail delivery to save money, but so far, Congress has blocked that idea. So while USPS and Congress nibble around the edges of reform, others, such as the Cato Institute, argue it is time to privatize the service. Other countries have done it, as this 2010 Cato paper details.

For some people, the idea of liberalization conjures up fears of a decline in the quality or universality of postal service. However, those things have not happened in the countries that have introduced pro-market postal reforms. Rather, these liberalizing countries have shown the ability to offer affordable, reliable, universal, and more efficient postal-delivery services.

In many countries, reforms have been pursued through the commercialization and corporatization of the postal service. Under such reforms, the government retains full or partial ownership but introduces modern practices involving management, labor compensation, finance, marketing, and capital investment. 

In some countries the private sector has taken large ownership stakes. For example, 69 percent of Germany’s formerly government post office Deutsche Post is now privately owned.⁴⁵ In the Netherlands, 100 percent of its formerly government post office is privately owned as TNT Post.⁴¹ The British government is considering selling off to private investors its ownership of the Royal Mail. At least 10 percent of the shares may be reserved for postal employees, which would have the benefit of reducing the unions’ incentive to take actions negatively affecting the company’s bottom line.⁴²

While some nations have partly or fully privatized their post offices, a parallel trend is for countries to reduce or eliminate postal monopolies and allow for entrepreneurs to offer competitive services. New Zealand and Sweden repealed their postal monopolies in 1998 and 2003, respectively, and Germany and the Netherlands followed suit in 2008 and 2009, respectively. In 2008, the European Union announced a plan to eliminate the national monopolies of all EU member states by 2013.