The Freedom Files
columnist: RS Davis

Topic: Economics
The Postal Robber Barons

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It's time to end this nation's most enduring monopoly.

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by RS Davis
(Libertarian)
Thursday, May 15, 2008

So, the UK has a problem with the Royal Mail. And it all stems from an end to monopoly, and the fact that no bureaucracy can ever keep up with private enterprise. BBCNews reports:

Royal Mail's 350-year monopoly ended at the start of 2006, when other licensed operators were given the right to collect and deliver mail.

However, it is still obliged to deliver letters to and from anywhere in the UK at a uniform tariff.

It made a loss of 279m in the year to the end of March.

The American mail system is a monopoly still, as it is currently illegal for any of their main competitors - FedEx, UPs, Roadway, etc - to offer first class mail service.

In fact, it's been illegal since 1872. And it has been challenged for nearly as long. Thomas Jefferson viewedthe Post Office as "a source of boundless patronage to the executive, jobbing to members of Congress and their friends and a bottomless abyss of public money."

Early abolitionist and anarcho-capitalist visionary Lysander Spoonerchallenged the postal monopoly as well, openingthe American Letter Mail Company to compete directly with the government monopoly. He even published a pamphlet entitled The Unconstitutionality of the Laws of Congress Prohibiting Private Mails.

The government did absolutely everything they could to shut him down, including siezing the mail, levying fines, and exorbitant legal costs. Within seven months, he was done.

That is how real monopoly works.

As I wrote back in 2003:

The government can compel you to support one of its business ventures, but a private company cannot. In a free-market economy, the only time a transaction takes place is when both parties benefit from it. You see, the only reason you buy something is because the value of that item to you is greater than the value of the money you trade for it, and the only reason someone sells something is when the money that is offered in trade is worth more to them than the object they want to trade.

But this is not true with a government-enforced monopoly. You give them money that you don't want to give for services you don't use, and you do it at gunpoint. (To see the gun, simply stop paying your taxes.)

Pretend you are the prospective monopolist, and you make flying cars. (Weren't we supposed to have those by now?) And say with the costs of rent, labor, and materials, you can build one flying car for $10,000. Since you have no competitors, you can charge anything you want for the Aeromobile 3000. So you charge $20,000 for your cars because you figure a 100% markup is a pretty good profit. Then you sit back and wait for the money to roll in.

And it sure doesfor all of about twenty seconds. Other potential businesspeople see your huge profits and say, "Holy crap! There's gold in them thar hills!" Suddenly there is a rush on to put out flying cars like yours. But they do something a little different. They think, hey, if they sell theirs for, say, $18,000, they can undercut you and steal your market share. They're right. So you drop your price to $17,000, and a new startup comes along selling theirs for $16,000 and so on until you reach what economists call market equilibrium.

Well, that's no way to run a monopoly. So, what can you do now? Well, there is only one way to raise prices and not encourage competition: the heavy hand of government. It is currently illegal to compete with Amtrak and the Post Office. So what can we as consumers do when Amtrak or the Post Office raise prices? Really only one thing:

Bend over.

Fortunately, the market is a powerful thing. If they don't have to, people won't pay over the fair market price for anything. That is why people use UPS and FedEx to ship packages, pay their bills online, send online greeting cards, and use email. That is why people fly, drive, take cabs, take busses, and carpool.

And the market is a powerful thing. Look at it this way. For years, UPs and Fedex have been offering more and more services for cheaper and cheaper rates. The Post Office, on the other hand, keeps raising their rates, the last increasejust this past Monday. Add to that the fact that your tax money also pays part of the bill, and you can see just how badly the Post Office would compete on the open market.

This effect can be seen, for sure, in the UK example. Since they ended the monopoly in 2006, look what's happened:

The postal regulator has called for Royal Mail to be partly privatised to safeguard the quality of the UK's mail delivery service.

Postcomm warned that Royal Mail's financial difficulties would worsen unless bold action was taken.

I'm actually quite delighted by this. The UK is taking the right approach. Rather than re-assert their monopoly, they are considering reducing it further and increasing competition. That is absolutely the right move. After all, since the demonopolization, "large companies had 'seen clear benefits from liberalisation - choice, lower prices and more assurance about the quality of the mail service.'"

Now, America needs to follow this example and end our own monopoly on first class mail delivery. And don't get me started on Amtrak.

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2008 RS Davis, all rights reserved.
Published: Thursday, May 15, 2008
Last modified: Thursday, May 15, 2008

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