Our ignorance is Canada Post's bliss
Tallest building in Wichita, in other words. Still, if pressed, I suppose I would be among those who said I “trust” Canada Post. I trust it not to open my mail, for instance. I also trust it not to deliver it before it’s good and ready.
A Strategic Counsel official speculated that the public esteem Canada Post now enjoys is a function of improved service. I rather think it is another example of Coyne’s Third Law: "The level of popular support for any public sector monopoly is the square of its decrepitude." Put another way, ignorance is bliss. The same lack of competition that makes us hostage to Canada Post’s shoddy service also blinds us to the availability of alternatives.
Or perhaps people trust Canada Post more the less they actually have to use it. Were we still truly hostage to the postal monopoly -- had email never been invented, nor private couriers -- it’s possible there would be more grumbling. People do have alternatives, that is, so long as those alternatives do not involve mailing a letter.
But in the area of Canada Post’s statutory monopoly, first-class mail, consumers remain as captive as ever. The post office congratulates itself on a 96 per cent “on-time” record, but it defines “on-time” in terms so elastic as to make lateness a real accomplishment: two business days across town, three within the province, four between provinces. So if, say, you mail a letter in Ottawa on Tuesday and it reaches Montreal the following Monday, that is “on time” in Canada Post’s universe.
By contrast, many other countries in Europe and elsewhere achieve comparable ratios for overnight delivery. Not coincidentally, these tend to be the same countries where the post office monopoly has been broken. Finland and Sweden have had competitive mail services since the early 1990s; Britain and New Zealand have since followed, while Germany and the Netherlands, already substantially liberalized, move to complete deregulation next year.
The results have been striking. In New Zealand, a recent study for the C. D. Howe Institute reports, “the proportion of letters delivered the next day has increased from 88 percent in 1988 to 97 per cent currently.” The privatized Dutch and German post offices have become world leaders in their field, expanding into other markets and providing competition for local providers.
So the question is why Canada should remain one of the few remaining bastions of state monopoly. Well, us and the United States, where, according to the president of the national letter carriers’ union, attempts to introduce deregulation have been stymied, thanks in part to “massive email protests” by the union’s 100,000 “e-activists.” (They’d have written letters, but there wasn’t time.) Call me Maude Barlow, but who wants American-style postal service?
Certainly there is nothing “natural” about the postal monopoly, or there would be no need for it to be spelled out in law. Indeed, it is only maintained by the most stringent enforcement: carry a letter for less than three times the prevailing postage, and you can do up to five years in jail. Lift that requirement and there would be no shortage of firms entering the market.
The standard case for monopoly, rather, is what’s known as the “cream-skimming” argument. Only a monopoly, it is argued, can preserve universal service at a uniform rate of postage. By charging the same price to deliver a letter to any address in the land, Canada Post forces its low-cost urban customers to cross-subsidize their high-cost rural counterparts. Competitors, on the other hand, would undercut the post office in the cities, leaving it to carry the money-losing rural routes.
But this imagined threat to universal service depends crucially on the assumption of a uniform rate. To undercut Canada Post, competitors would presumably have to be free to set their own rates. Why shouldn’t Canada Post be able to do likewise? Why should there be be a uniform rate? Few things cost the same in remote logging camps as they do in downtown Toronto: why should a stamp? Why should a single mother in Point St. Charles subsidize the correspondence of a stockbroker taking early retirement in Whistler?
To quote an old economist’s line: Redistributing income is the job of the government, not the post office. If there must be a subsidy for rural delivery, it should be direct and transparent, not buried in the price of a stamp. Indeed, the true price of this particular cross-subsidy isn’t the hidden postage tax -- it’s the political cover it provides for an indefensible monopoly. It isn’t just costlier stamps for city folk. It’s lousier service for everyone.
5/23/2007
