The U.S. Postal Service (USPS) is a major business enterprise operated by the federal government. It has a legal monopoly over first-class mail, which prevents entrepreneurs from competing to improve quality and reduce costs.
I describe the postal system’s inefficiencies here, and discuss how European countries have privatized their systems and/or opened them to competition.
In this country, privatization is needed more than ever because the USPS is increasingly distorting the booming package delivery business. My study discusses USPS cross-subsidies between its mail and package activities, and a recent article in the Wall Street Journal explored the problem further.
Josh Sandbulte argued that the USPS gives Amazon an unfair advantage over brick-and-mortar firms:
"The U.S. Postal Service delivers [Amazon’s] boxes well below its own costs. Like an accelerant added to a fire, this subsidy is speeding up the collapse of traditional retailers in the U.S. and providing an unfair advantage for Amazon.
… The 2006 Postal Accountability and Enhancement Act made it illegal for the Postal Service to price parcel delivery below its cost. But with a networked business using shared buildings and employees, calculating cost can be devilishly subjective.
… An April analysis from Citigroup estimates that if costs were fairly allocated, on average parcels would cost $1.46 more to deliver. It is as if every Amazon box comes with a dollar or two stapled to the packing slip—a gift card from Uncle Sam."
In a response to Sandbulte here, the USPS claims that they do not cross-subsidize. The solution for this dispute? Privatize the USPS, repeal the monopoly, and let competitive markets decide on product pricing.
Read more at https://www.cato.org/blog/usps-giant-distortion-machine
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