Honey, we blew up the post office! How we traded a working public utility for a business failure in one fell swoop

On December 11, 2013, Canada Post announced a new ‘Five Point Plan” to return the corporation to profitability.

  • No more home delivery. Gone!
  • Postal rates of a dollar a letter – a 59% increase.
  • More unmanned kiosks
  • Fewer sorting facilities
  • More postal franchises.

The goal here is clearly not to provide a good service or to move the mails. The clear goal is profitability as a means to the end of ensuring that Canada Post does not receive any tax money. That is what self-sustaining means as it applies to Canada Post.

Spokesperson for Canada Post Anick Losier noted:

“When we did our consultation, the one thing that was crystal clear is that Canadians don’t want to see a burden on their taxes.”[1]

Well, as Aristotle once noted a couple of millennia ago (and I paraphrase): ‘What is attributable to the whole has no meaning’. No one anywhere wants a burden on their taxes and neither do I. So what?

You see, the post office, for the last 162 years has been a business that provides the public service of delivering the mail across the country for a standard rate. If it has to be a self-sustaining business in the sense that it would get no subsidy, it has to fail.

Let me repeat: it has to fail!

Private sector businesses already know this. That is why they get big government grants and tax breaks to grow and sustain their businesses. Recent examples abound: Cisco, Samsung, Caterpillar and Honda.

Why should the post office be any different?

We don’t shut down health care or pull tax grants and tax breaks from businesses because they aren’t self-sustaining. And the last time I checked, Canadians didn’t like THOSE tax burdens either.

But joking aside, the real point is that Canada Post still has a responsibility to deliver the mail, however expensive, both to and from far-flung places across the country.

What do you think tough-minded private sector CEOs would say to a responsibility like that if asked to run Canada Post at a profit? My guess is that they would quickly jettison the unprofitable routes or charge an arm and a leg for those services like the private carriers do.

But neither Canada’s government nor Canada Post is willing to dump their cross Canada delivery mandate nor let go of the myth that you can run a public service that is self-sustaining without government help.

The result is a horribly contorted mess of public responsibilities delivered under the guise of phony profitability in the service of a jaundiced interpretation of predictable consultation results.

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But it was not always so. Let’s go back to the beginning of the modern postal service in Canada.

On November 24, 1852, the New York Times published an article titled “Cheap Postage in Canada”. Canada had reduced its postage rates drastically and had begun to produce its own postage stamps after the Canada Post Office had been “given up by the Imperial authorities.”[2]

The prevailing expectation was that revenues would drop precipitously. But something strange and unanticipated began to happen:

“With all these reductions, it has been found that [the] 15,000 pounds appropriated [in the] last session of the legislature to meet the apprehended deficiency in the revenue, has more than covered it. The first quarter of the present fiscal year … exhibits still more favourable results of the cheap system. The increase of business is very marked.”[3]

One of the longest lasting public policy innovations in Canada got off to a good beginning. The change was to allow any person in Canada to post a letter of a half-ounce or less to anyone else in Canada for a standard fee – 3 pence in 1851. The new policy replaced an almost incomprehensible system of charges that took great expertise to administer and which few understood.

Some 162 years later, a vestige of this postage policy is still in place but on life supports. Anyone living in Whitehorse can still send a standard letter to a friend in St. John’s for a low standard fee (63 cents + sales tax in 2013 – soon to move to a dollar). The same rate applies to someone mailing a letter to a friend across the street.

From many points of view, this long lasting public policy contains grave inequities. It costs much more to deliver a letter across the country than it does to mail one across the street. The subsidy to people in far-flung places is obviously higher than to those living closer to large post office hubs. Clearly, there is a case to abandon this 162 year old policy and align charges closer to real costs.

But the standard fee postal rate is a policy that helped build Canada. The Times article from 1852 tells us how:

“During the past fiscal year, 243 new Post Offices have been established. Post communication between Canada and the provinces of New Brunswick and Nova Scotia, by land route via Quebec and Temiscuator has with the cooperation of the latter provinces, been increased from twice to three times a week.”

The article noted that mail usage increased by more than 110% from 1851 to 1852. But the new cheaper postal rate was not implemented only in the name of simplicity:

“The Postmaster General gives it as his opinion that packet postage ought to be reduced; the pressing high rates pressing severely upon poor emigrants and others, at a time like this, when thousands of families are as it were, divided between the two continents …. in conclusion, the Postmaster General recommends a further reduction of postage and expresses his opinion that the financial condition and prospects of the Department  at the close of another year, will be such as to warrant the Governor-General in recommending a penny rate.”[4]

What is going on here? Canada implemented a simpler system that helped make the nation more productive, built our early communications network, and kept Canadians in touch with one another. It was less expensive, addressed poverty, and was more popular with the public. Was it a fluke?

The answer is no. Our system of roads, railways, airports, telecommunications, and our electrical grid had similar outcomes when they were first put in place. Things got less expensive and our living standards rose. Each of these segments of our modern infrastructure continues to distinguish modern Canada and other rich countries from developing countries that have poor utilities or lack modern infrastructure.

But it seems that we are now at the precipice of blowing it all up because of a mysterious craving for public utilities to fail in the cloak of a business model that must die from the wound from its own sword.

Only in Canada?

Pity….

js/ Jan.1/2014 – Parts of this piece are excerpted from a 2011 paper found here: http://openpolicyontario.com/wp/wp-content/uploads/2012/02/Turn-Out-Lights-oct311.pdf

 



[1] Bret Evans, Canadian Stamp News, Home Delivery out, postal rates up at Canada Post, p1., December 31, 2013-January 13,2014

http://www.canadianstampnews.ca/

[2]. “Cheap postage in Canada”, the New York Times, November 24, 1852

 

[3]. Ibid

[4], Ibid

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