USPS Giveth and Taketh Away

The newest innovation from Amazon.com — they seem to come every few hours or so — is the delivery of goods to your home on Sunday. The service is popular and expanding every day. I was of course curious what courier service Amazon was using for this. Had the company started its own postal-style service?

It turns out that Amazon had worked out a deal with the U.S. Postal Service. Very curious. Here we have a gigantically successful private company actually inspiring the post office to get off its duff and serve the people.

What does this portend for the future?

Looking at Post Office financials, every aspect of its business is losing money. They lose a couple of billion every quarter, forever adding to its $64 billion pile of liabilities. First-class mail is dead, never to return.

However, one sector is growing: package delivery. This is for an odd reason. The USPS’s service is underpriced relative to the private sector, and this happens at what will ultimately come at taxpayer expense.

In the bigger picture, no government-backed institution is more absurdly unnecessary as this one. It is a dinosaur. It’s amazing that it exists at all — living proof that government will forever try to live in the past, no matter how bad the service, no matter how ridiculous its service model.

The USPS is an important symbol of the past and future of economic systems themselves. The post office was once the pride of government partisans all over the world. Vladimir Lenin in 1917 brushed off the whole problem of organizing production under socialism with a simple formula. He would “organize the whole economy on the lines of the postal service…all under the control and leadership of the armed proletariat.”

Problem solved. Chilling prospect!

Is what Amazon doing here saving the Postal Service or gradually taking it over? My vote is for the latter, and it’s probably a good thing that the Postal Service agreed to go along. The downside is that this arrangement does hint of a certain cronyism. Amazon is benefiting from subsidized prices. And the post office is crowding out more robust private sector solutions to the issue of Sunday delivery.

To be clear, the Postal Service is not ready to go off quietly into the night. Consider the incredible and tragic story of the company called Outbox. Several great young entrepreneurs had a beautiful idea. They would offer a service of scanning your mail and delivering it to you via email.

This was not some kind of sweetheart deal between the Postal Service and a start-up company. Outbox sought customers’ permissions to have mail redirected from the home or P.O. Box of the company. That mail was scanned and given to the customer. This is completely brilliant and based entirely on an enterprise model.

And it worked very well. Customers were thrilled and the business was growing. Venture capital was pouring in.

In many ways, this business model seems fantastic. It is innovative. It is correcting for the failures of government but coming to terms with the reality that it is here and not going away on its own. It seems like a great transition mechanism for going from a terrible system to one that is eventually privatized. After all, if Outbox is delivering in the mail to you, why use the Postal Service as an intermediary at all?

Then one day the young entrepreneurs got a call to visit postmaster general Patrick Donahoe in Washington, D.C.. They figured they were going to be praised for their wonderful model that saved the post office so much money and time. Instead, they were told that they Post Office would no longer allowed mail to be redirected to their scanning operations. In a few words, the post office wrecked the entire business model.

Why? He told them that Outbox was disrupting their business with bulk mailers. The entrepreneurs protested that this is good for customers and that customers want a different system. Then Donahoe said the following: “You mention making the service better for our customers, but the American citizens aren’t our customers. About 400 junk mailers are our customers. Your service hurts our ability to serve those customers.”

Donahoe claims that he never such a thing. Regardless, the post office isn’t disputing the rationale here. It’s very revealing. In other words, the purpose of this preposterous institution is not to serve the American people, in case you thought it was which surely you did not. Its purpose is to get funding from people who stuff your mail box full of things you don’t want.

In other words, it is there to serve cronies, not you.

Outbox took it on the chin and thought of another workaround. They would put together fleet of cars to drive around and pick up people’s mail from their mail boxes and cart if off to scanning centers. They “unpostmen” would “undeliver” mail and make it possible to retain the service they promised without depending on a forwarding drop off.

Well, after a few months of this, it became rather obvious that this was unsustainable from a financial point of view. Brilliant in many ways, but still unworkable. So Outbox shut down its operations. Goodbye innovation.

And today, Patrick Donahoe can be very pleased with himself for having used the power of the state to keep the future from happening. He has successfully preserved the ability of this thrown-back monstrosity to lose money by dumping piles of paper in a box at our residences every day.

Think back to Lysander Spooner in the late 19th century. He too tried to compete with the post office and he too was shut down. As Marx himself said, “History repeats itself, first as tragedy, second as farce.”

How long can the Postal Service racket last? Free enterprise will continue to innovate even as government becomes ever less capable of meeting anyone’s needs. What happens, for example, if the bulk mailers discover no one cares any more, that it is not financially advantageous for them to do what they do?

At some point, and that day can’t come too soon, its anachronistic services will be buried in the rubbish of its own irrelevance.

No government can live off force alone. The less compelling its product to the people, less weaker it becomes.

(P.S., for those looking for another point of view, consider the Heritage Foundation’s defense of the post office attack on Outbox. That’s right, the Heritage Foundation)