No Longer Topical Canada Post Post

Now that I’m on Twitter, I realise that if I want to keep up with the daily polemics I have to be willing to masquerade knee-jerk reactions to some super-topical event as studied expert analysis. I was still unable to keep up, so here are my no-longer-relevant thoughts on Canada Post’s decision to eliminate door-to-door urban service.

One of the more pronounced voices in this “debate” has been the National Post‘s Andrew Coyne, who is pushing for privatization and liberalization (which he more or less conflates) of postal services. Prior to this recent announcement, Coyne already tried to make Canada Post’s “monopoly” a cause célèbre.

The following rhetorical question posed by Coyne reveals much about the assumptions he brings to his position: “By what principle of social justice are city residents, rich or poor, obliged to subsidize the correspondence of gentleman farmers?”

The answer to this question lies in the history of the state-building function of essentially all national postal services (obviously, Coyne has never seen Kevin Costner’s The Postman). The principle is one of social cohesion and political enfranchisement (or more cynically, state control). It is the same principle that guided the construction of a national railway in the early days of Canadian confederation. For there to be a coherent nation-state called Canada, its citizens need to be able to pay taxes, fill out censuses, and communicate with other Canadians. In order to ensure the political enfranchisement of all citizens, regardless of wealth or where they lived, access to communication needed to be ensured (indeed, those in the rural fringes were the most important to ensuring political coherency; just consider the government’s current interest in Arctic populations). Equal access to the post went hand-in-hand with democratic visions.

By the way, Coyne is actually wrong about his rhetorical assumption. City residents do not subsidize the mail of rural-dwellers; the most expensive postal codes to service are urban.

Coyne’s real question is, why is the government involved in the delivery of mail at all? To understand why this is so and whether it makes sense one needs to look at the nature of the service being provided. There are compelling arguments as to why things like transit systems, police forces, and sewer infrastructure are publically controlled. It’s hard to imagine how an open market for subways would work, or how a coherent connected public transportation system would come about in a free-market environment. So, is mail service like public transportation? Is it essentially a public service, or merely a commercial enterprise? Does it make sense for mail to be centrally controlled? Does it make more sense from an efficiency point of view to centralise mail distribution? Does it make sense from a logistical point of view to have only one kind of mail box on the streets of cities and towns? These are questions that Coyne and others who rally against the “monopoly” of Canada Post dismiss out-of-hand.

For Coyne, Canada Post is not like other necessary public services for one simple reason: it is self-sufficient. Meaning, its revenues cover its operating costs. Obviously, it would make no sense to talk about privatization or implying the benefit of free-market competition if it were clear that a national postal service absolutely needed to be subsidized (if that were the case, Coyne would instead be arguing how the service cuts are a good thing because they’re saving us taxes). But Canada Post makes money, and thus according to good capitalist principles, these profits should be made exclusive to a very small group of people (on the other hand, when necessary infrastructure is required the bill should be footed equally by the public, regardless of individual wealth).

Beyond his taken-for-granted commitment to privatization, the evidentiary crux of Coyne’s position is his claim that, “Every one of Europe’s national postal services, for example, have been or are being opened to competition, a process that must be completed by 2013; several, including those in Germany, the Netherlands and Sweden, have also been privatized. There, prices are falling, not rising; service is improving, not declining.”

However, the situation in Europe is more complicated and not as uniformly rosy as Coyne suggests (shocked). The most successful European postal company (and the exemplar most touted by privatization advocates), Deutsche Post DHL, has benefitted from its de-facto monopoly during the transition to privatization and liberalization, and arguably still does. It received billions of dollars in federal assistance during its crucial restructuring phrase, which began long before privatization, and was further supported by the profits garnered from its previously official monopoly. It was also until very recently legally mandated to provide universal service, for which it received tax exemptions, and remains the only German postal company to do so.

Furthermore, contrary to what Coyne suggests, the service in virtually every European country that has privatized mail has declined, at least in terms of accessibility. Depending on how important you rank accessibility as a measure of service, overall service may have also been seen to decline. There have been massive post office closures in Austria, Germany, and the Netherlands  (in the latter 90% of the post offices have been closed). Much of these have been relocated to shops or banks, but the overall number of postal service locations has substantially declined, most adversely affecting those in rural areas. Basic postage rates have marginally decreased (though not in Austria, where it has increased significantly). It should also be noted that even in the successful Germany, postage rates are significantly higher than in Canada.

Thus, if you are going to cite Deutsche Post as an example of a successful privatization, or a model for Canada Post, you need to include a ton of asterisks. Part of the European Commission’s rationale for privatization and eventual liberalization of postal services was to open the European market to fair competition, so that state monopolies would not dominate foreign markets. The situation in Canada and North America is much different.

And while many European countries have successfully privatized, liberalization has been negligible with regards to individual mail. And if one is making an argument for increased competition and consumer choice, the latter is far more important (though pretty much everyone writing on this topic has conflated privatization and liberalization).

Why is privatization of Canada Post even necessary in this regard? The argument for privatization is a peculiar one since it in itself won’t increase competition, nor is there any indication that it will increase service, though it might decrease costs (due to the “flexibility” of private companies, which usually means the flexibility to cut services and workers). Eliminate the exclusive privilege to deliver letter mail granted to Canada Post and let other companies compete in this market. Liberalization does not depend on privatization, and indeed, in the case of Germany, the assisted privatization of Deutsche Post has not resulted in (and perhaps stifled) any meaningful competition.

However, a major omission for the argument for privatization is that competitors have not been clamouring to enter the personal letter-mail market.

This is because personal mail is not profitable. It is a shrinking market. The companies that want into the mail market want huge business contracts to deliver unwanted flyers to you, not to deliver your postcards. What has led to the profitability of Deutsche Post has been a massive restructuring (funded by the federal government) that allowed it to enter markets not traditional to a national postal service. It expanded its third-party logistics operations and engaged in a series of acquisitions and mergers, including one to operate long-distance buses (a similar logic leads to Canada Post selling pens and collector coins at the post office). Essentially, all of these other business operations is what allows Deutsche Post to deliver personal mail, just as Canada Post’s large corporate contracts subsidize its obligation to deliver your Christmas cards.

In this sense, the mail as a form of media is not unlike most others. Television in itself is not a massively profitable venture; it only becomes so when you promote advertising, and thus subsidize the user cost. The same can be said for traditional and online newspapers, blogs, twitter, and facebook (though mandatory subscriptions, still with advertisements, are on the rise). There are some exceptional exclusively subscriber-funded media sources, such as Netflix, but they are still uncommon. Perhaps they are a sign of what is possible if massive profits are cared about less (only slightly less, of course). This is clearly not a model for the post, however, as solely-user-fee-funded mail would be prohibitively expensive given the alternatives available to many users.

The question remains, however, if mail, as a form of media, is a vital public service. Coyne clearly doesn’t believe that access to communication is a matter of citizenship. It is not like education (though plenty of “conservatives” rage against publicly-funded schools, too). He would probably scoff at the idea of subsidizing internet access for the poor. I, on the other hand, do think that access to communication is more like access to education than access to a Tim Horton’s. Where I agree with Coyne, though for different reasons, is that mail is an anachronism.

The current motivations for reducing mail service are suspect, but any moves that will hasten the demise of planes and trucks transporting little pieces of paper with words printed on them across the country will be ultimately beneficial. As a means of communication, the mail is ridiculously inefficient, wasteful, and unnecessary. This is not to dismiss the concerns of those for whom alternatives to mail are not easily adapted or readily available, and ensuring that the needs of those on the margins are addressed in the inevitable transition to a less mail-intensive communications system is precisely the responsibility of the community and government, and also the same “principle of social justice” that ensured all Canadians had access to the post.

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