US Should Look To New Zealand When It Comes To Postal Service

in Economics/Politics by

Whether it be the mailwoman accused of stealing $2,000 in gift cards from undelivered mail or the 25 bags of mail discarded in a sewer this May, it is clear that the United States Postal Service (USPS), is riddled with problems. Service is slow, mail becomes damaged during shipment, and delivery estimates are never quite accurate. Everyone seems to have a complaint when it comes to how things operate down at their local post office.

It doesn’t have to be this way. The United States should look to New Zealand for guidance. In the 1980s, New Zealand took their first steps to privatize their postal service, and in 1998 the New Zealand Post (NZP) was stripped of its final monopoly power. Now, NZP still delivers mail to all New Zealanders three days of the week while the private sector has stepped in to provide other services.

In contrast, USPS is continually losing revenue as letters are increasingly replaced by electronic methods of communication. Since 2007, USPS has lost more than $50 billion in revenue. Current monopoly power granted by the federal government forces the organization to continue losing money. Because of its government partnership, USPS is the only group that can deliver letters. The problem is fewer and fewer people are sending letters as electronic methods of communication replace snail mail,. Where a normal business might drop out of the market or find a more profitable way to approach the market, the USPS is required to deliver six days a week to all locations.

How did New Zealand get it so right?

Following Margaret Thatcher’s lead in the early 1980s, a new wave of privatization spread across the globe. New Zealand was perhaps the first major country to privatize their postal service, but they would not be the last. Early on in its existence, the European Union made it a goal to privatize the postal services in their member countries. By 2012, every country in the EU had privatized. The trend continued to spread. Just last year, Japan privatized their postal service and sold the shares on the public market.

Privatization consistently yields good results. When private competitors are actually permitted to rival the existing monopolies, prices go down, quality goes up, and service providers must more closely reflect the needs of their clients. When the government gets out, effective actors take their place.

This is primarily because private actors must be responsive to price pressures and market trends. For instance, the USPS must continue delivery six days a week because of pressures in Congress, even when they have repeatedly asked for reform that would change the delivery schedule to 5 days a week. The Postmaster General at the time, Patrick Donahoe, argued that this would be a useful step when it comes to USPS saving money, but special interests caused hold-ups in Congress that made it impossible.

In New Zealand, NZP is still designated as the country’s universal service provider, meaning that everyone still has access to mail delivery. However, they now have the flexibility to exit markets where they are no longer competitive. Instead of taking losses in package delivery, the NZP stepped aside to allow the private sector to enter. As a result, new local businesses (much like UPS and FedEx) have sprung up to provide package delivery in New Zealand, and private companies have taken over the market for priority and one day shipping.

So why hasn’t the United States followed suit?

USPS is subject to Congress’s rules. Even if the Postmaster General were to have good ideas for reforming the organization, he or she would not be allowed to move forward without Congressional approval. With several recent rejected reform efforts, it is clear that Congress remains unwilling to hand over the reins. Politicians, fearful of political retribution from lost jobs back home, continually pass subsidies that allow even the smallest post offices to keep their doors open. Their short-term focus on jobs will only delay problems that will eventually need to be addressed. Privatizing USPS will remove politics from the issue and allow the private sector to step in where it is most convenient.

While privatization cannot guarantee a certain end to the scandalous headlines, it certainly would be a step in the right direction. Everyone has their own complaints about the post office, and it’s time that we took a new approach.

Adrienne Carrier, a junior at Hillsdale College where she is studying Politics and Economics. She enjoys writing and researching on the administrative state and cronyism.