Letter From EuropeDecember 6, 2006
With nationalized health care, sky-high unemployment and blissfully short work weeks, you might think that the European Union is rolling backwards on the wheels of socialism. Meanwhile, with Wall Street, Wal-Mart and Viagra booming, the United States powers ahead, driven by capitalism and open markets.
Right? Not necessarily.
On Oct. 17, only one day before a meeting of the European Commission, the chief executives of five major European letter carriers, representing 60 percent of Europe’s mail volume, gathered to express their support for the complete liberalization of Europe’s postal sector. In their countries, the companies demonstrated, a deregulated and competitive postal industry has led to lower prices and better service.
A day later, the European Commission proposed that the 25 members of the European Union have until 2009 to open their letter-delivery markets to full competition. As Charlie McCreevy, the internal market commissioner for the European Union, explained: “It is not fair that some markets are open and others are not.”
So far, the impact of postal liberalization in Europe appears to be largely positive. According to a 2005 study by Ecorys Research and Consulting, postal deregulation could result in a price drop of 20 percent to 25 percent for the delivery of bulk mail in urban areas. The study also concluded that with liberalization, service would most likely improve.
Countries that have opened up their postal markets include Britain, Finland and Sweden. In Germany, Deutsche Post’s monopoly has been limited to domestic letters weighing less than 50 grams (about 1.8 ounces), and a field of competitors has already sprouted for other mail.
Earlier this year, Austrian Post was partly privatized, and Britain ended the Royal Mail’s 350-year-old monopoly on letter delivery, turning the letter carrier into a government-owned corporation. The British government is already saving money, as some departments have switched to private carriers like UK Mail and TNT Mail.
But even though many countries have embraced open markets, others maintain the monopoly that European Union law allows on letters that weigh less than 50 grams. Belgium, France, Italy, Spain and several others are expected to fight the commission’s proposal, which still requires the approval of the European Parliament.
Freer markets would surely be better not only for Europe’s consumers and businesses, but also for American companies that do business overseas. And yet, if the United States were in this fight, we’d be on the wrong side. We’d be right there with France, blustering about how government agencies create jobs while private companies take them away.
After all, an outsized and inefficient government-subsidized monopoly runs America’s mail system, and it steadily raises rates on its captive consumers. Private competitors can enter the delivery market only if they charge at least $3 per piece or twice what the Postal Service charges, whichever is greater.
Congress is now considering legislation that would present the first major reform of the United States Postal Service in 30 years. Despite the free-market rhetoric of our policymakers, however, this legislation makes no attempt to reduce the Postal Service’s monopoly, let alone to privatize the agency.
Last year, Japan’s prime minister, Junichiro Koizumi, gambled his re-election on a plan to privatize Japan Post, a gigantic government bureaucracy with nearly 24,700 post offices. The United States government strongly supported the move, issuing a report explaining why Japan’s postal liberalization would contribute to economic growth.
America loves to lecture other countries about the merits of open markets. But when it comes to postal reform, the real cowboy capitalists are oceans away.
Sam Ryan is a senior fellow at the Lexington Institute, a policy research group.