Private Mail Could Be a Public Boon
JANUARY 01, 1970 by MELVIN D. BARGER
Mr. Barger is a public relations representative in Jackson, Michigan.
The postman is figuratively ringing twice in a number of American cities these days. One of the rings could be sweet music to citizens angered by the growing problems of the Federal postal system.
The new courier on the scene is the Independent Postal System of America, making its appointed rounds now in many cities and soon to open services in more. IPSA, established in February, 1968, is an upstart in the communications field and an infant among corporations. But it has made a sensational start and has all the earmarks—or perhaps postmarks—of being the right idea at the right time.
One man who obviously thinks so is its founder, 42-year-old Tom Murray, who already, pictures IPSA jetting ahead into the billion-dollar class. Murray, a restless, entrepreneurial type, could be accused of exaggeration, except for several interesting facts. One, IPSA has already landed enough sales to produce $1 million in profits during its first year of operation. Two, the potential market is there; postal services run into billions and could go much higher in the years ahead. Three, public opinion is turning bitterly against the U.S. Post Office Department, and the times are right for constructive change.
The last item may turn out to be a matter of considerable importance to IPSA’s future. Until a few years ago, the public accepted the government postal monopoly as a fact of life; some people even seemed to believe that only government had the competence to carry mail. A suggestion that private corporations could handle postal services with greater efficiency and economy was often hooted down; it was like suggesting that a private company take over the Washington Monument or the U.S. Coast Guard.
But a number of things have made a private mail system more acceptable in the public mind. Postal service seems to be deteriorating, or at least not keeping up with the noticeable advances in other services (such as the telephone system). The yearly postal deficits are always well-publicized, causing people to wonder frequently "why the Post Office can’t at least pay its own way." There have also been the annoying rate increases and raging legislative battles over proposed rate boosts for different classes of mail. Attempts to raise third-class rates have enraged business mailers, and efforts to change the admittedly low rates for publishers has probably contributed something to the bad press the Post Office has been getting.
There may also be some disillusionment over the frequent crusades to make the Post Office more businesslike, an effort that seems to be revived with each change of administration. There was honest hope that Arthur E. Summerfield, a successful Michigan businessman, might succeed in this when he joined the Cabinet in 1953 as President Eisenhower’s Postmaster General. Summerfield did make some needed improvements in using private capital to provide for new post office building construction, but he also incurred the hostility of the postal unions and faced considerable political opposition to many of his plans. Summerfield’s reign at the Post Office proved that the Department’s problems couldn’t be solved simply by putting an astute businessman in the head chair.
The Kappel Proposal
The latest ploy in the attempt to buck up the faltering Post Office was the proposal by the Kappel Commission to put the Department under a government corporation. Mr. Kappel, the retired board chairman of the giant American Telephone and Telegraph Company, was doubtlessly chosen to study the Post Office because of his own impressive career in a related communications field. The Kappel proposal now has the endorsement and active backing of President Nixon, but it faces stiff opposition in Congress and from the postal unions. Right now the Kappel plan appears dead. If organized along lines suggested by Mr. Kappel, the Post Office might conceivably become better administered, with less interference from Congress and more control over its own operations. However, the Kappel recommendation is essentially an attempt to remedy the shortcomings of a socialistic enterprise by converting it to another organizational form; it still rests on the delusion that socialism can be made to work if only the right combination of management and organization can be found.
The question of private ownership of the Post Office did get an airing by Mr. Kappel, who dismissed the idea of selling the Post Office because, with the Post Office’s deficit, liabilities, and investment needs, "you couldn’t sell it to anybody."
The fact that the question of "selling" the Post Office was even asked shows that there’s growing interest in a private postal system. Mr. Kappel’s answer revealed the philosophical limitations of a man who has spent his own lifetime in a monopolistic enterprise, albeit a highly successful one. He did not seem to be thinking of the possibility that postal services could be supplied by new organizations, not just the one now in existence. He apparently could not bring himself to the point of proposing that anybody ought to be allowed to carry any class of mail, that mail deliveries should not be a legal monopoly of either a public or a private organization.
From Bellboy to Mailman
Against this background of mounting dissatisfaction with the Post Office, Tom Murray’s Independent system has come into existence. Murray had no previous postal experience and would have had trouble getting a minor position in the Federal System. An Irish immigrant, he came to America in 1950 and began his business career as a bellboy in a Detroit hotel. Before long, however, he had become manager, and after that his rise was spectacular. The Mayor of Detroit actually proclaimed a "Tom Murray Day" in 1955, in recognition of Murray’s outstanding service in community affairs. He was soon hotel owner as well as manager.
Murray’s interest in hotels eventually took him to Oklahoma City where a conversation over a cup of coffee finally nudged him into the mailing business. A local businessman, Darrell Hinshaw, was complaining about his own growing difficulties with postal services. This was nothing new. But the complaints went a step further. Murray soon had some calculations and surveys which indicated that a private company might be able to carry third-class mail at lower rates than the government and still make a profit!
The figures fired Murray’s imagination, particularly the business potential involved. Hotels and motels, as everybody knows, work in a field of fierce competition, with top limits on the growth that even the most successful firm can achieve. But here in the mailing field the potential market for third-class mail alone was in the billions. If a private company could break into the field and establish its own position, it could not only share this market but also participate in future growth of breathtaking proportions.
A Loophole for Deliveries
But how could a private firm enter the field when legislation prohibited it? Private mailing companies had actually flourished in early America, but by the middle of the last century had been driven out of business by the Federal Private Express Statutes. How could Murray work his way around statutes that had barred other businessmen from the mails for so long?
His door of entry was third-class mail, which has been shrilly condemned as "junk mail" in recent years and at times has been held responsible for many of the Post Office Department’s problems. There’s a fine line between "third-class" mail and circulars. A business firm for example, has the legal right to deliver printed material to residences, but not to use the mailboxes. Murray dashed off to a Third-class Mailers’ convention, and listened to their gripes and problems, and also found them receptive to the idea of a private delivery system.
"I felt that the Third-class Mailers had made a major error in permitting their products to be labeled ‘junk’," Murray says. "Third-class mail isn’t junk, and it deserves its rightful place in the area of commerce."
Certain by now that he was on track, Murray found a group of backers who could put up $50,000 immediately and underwrite an additional $2 million for later expansion. By January, 1968, he had incorporated IPSA, opened offices in Oklahoma City, and announced plans to begin service in February. Deliveries would begin in the city, and then fan out to nearby states, with the long-range goal of becoming nationwide. As if to emphasize the nationwide goal, Murray chose an outline map of the U. S. for the system’s trademark and insignia.
Announcement of the daring venture captured the public interest; yet it also seemed a too-risky exercise in audacity. Newsweek magazine called it a "showdown" with the Post Office, and hinted that Murray would be blocked by Federal authorities. Reporting that Murray had already signed delivery contracts with a rubber firm and an insurance company, Newsweek also cited a Post Office Department legal counsel’s opinion to the effect that Murray’s operations were illegal, that nobody but the Post Office has the right to carry any class of mail. The magazine also suggested that Murray would be courting real trouble when he began making delivery in home mailboxes.
If there was any showdown, nobody in IPSA’s headquarters ever noticed, because the Independent System swung into operation on its announced starting date and was soon making almost routine coverage of most of Oklahoma City. Murray wisely avoided challenging the Post Office Department ruling on use of home mailboxes, and developed an attractive plastic container which can be suspended from most doorknobs. The container not only protects the mail and other articles, but one side also serves as an advertisement for the Independent System. The other side has been sold as an advertisement for other firms, actually making the plastic container a profit item instead of an additional cost burden. IPSA would still like to use private mailboxes and is currently trying to get approval of a dual-compartment type, but the plastic bag is doing very well for the time being.
Murray’s customer list multiplied almost magically, and by the end of the first year the system had served more than 100 clients and was operating in every major Oklahoma city as well as communities in Texas, Missouri, Ohio, Arkansas, Alabama, Mississippi, Illinois, New York, and even Canada. The company was expanded rapidly by selling franchises, and received hundreds of inquiries from private individuals seeking their own post masterships. At the same time, IPSA was getting remarkable press attention, almost all of it favorable. Newsweek’s follow-up article after IPSA’s first year was largely a success story and other publications such as Saturday Review and Nation’s Business saw a bright future for the Independent System, the latter calling it a possible end to the "130-year-old Postal mess."
Guided by the Market
Surprisingly, however, many of the Independent System’s operations seem to be similar to those of the Federal department. The couriers still travel on foot, and use vans closely resembling U. S. Postal vehicles. IPSA deliverymen and U. S. mailmen wear almost identical uniforms, walk the same routes, and are often chased by the same dogs. What innovations have given the Independent System an edge, allowing it to take business away from the government mails?
One advantage has been price. Generally, IPSA has been able to deliver third-class articles at about 90 per cent of the Federal rate. A 2½ ounce item, for example, can be delivered by IPSA for 3.3¢ versus 3.8¢ for the U. S. rate. More important, IPSA can guarantee a specific delivery date, which many business mailers such as local retailers must have in publicizing special sales and other events. The Independent System has no "first-class" mail taking precedence in employees’ minds, and hence all mail is given the same attention.
Beyond that, IPSA’s businesslike approach to problems may be winning them some clients. IPSA salesmen are making regular calls on large business mailers, such as Sears Roebuck, making it clear that their patronage is wanted and appreciated and offering to make service as attractive as possible. Until now, it has been the business mailer who has had to go hat-in-hand to deal with Postal bureaucrats and to be reminded of his product’s inferior status in Post Office operations. It must be refreshing to most of them not to hear the term "junk" anymore.
Is IPSA actually handling third-class mail more economically than the government? Probably, although nobody can prove it because the Federal system has no systematic approach to its own costs and cannot say for certain that any class of mail is profitable or unprofitable. As a politicalized institution, the Post Office has simply carried the mail at rates established by Congress, then appealed to the same Congress to make up its annual "deficit." Even the deficit has been something of a myth, however, because the Department doesn’t follow customary accounting practices for its overall operations and cannot really be compared with a corporation of similar size. For one thing, capital expenditures for the Post Office have been intolerably low almost every year and there are no indications that Congress will be willing to make them any higher.
The Uncertain Future
Where will it all end? Will Murray’s Independent System continue to flourish and grow until it replaces the Federal Post Office? Or will the two systems continue to operate side-by-side, with Murray’s organization specializing in "third-class" and the U. S. Post Office carrying the rest of the mail?
Most likely, IPSA’s growth and success will turn out to be a source of embarrassment to the Federal mail carriers. In time, the department might conceivably want to restrict IPSA’s operations. But this would bring it into collision with public opinion, which wouldn’t support favoring the government’s Goliath at the expense of Murray’s David. If anything, public opinion may veer in the direction of permitting Murray or anybody to haul all classes of mail. If so, this would be a tremendous victory for free enterprise, and would finally give libertarians a chance to prove on a wide basis what they have always contended: that private businessmen can deliver the mail for a profit and give the consumer the same efficient service he gets in the delivery of other items.
Some persons believe that a private competitor may cause the Federal system to bestir itself to more efficiency. But don’t look for it. The faults with the U. S. Post Office are the basic shortcomings of a socialistic, politicalized bureaucracy, and the officials and others working in the system, even if somehow they could know what ought to be done, are powerless to make the necessary changes. They simply can’t make and carry out the day-to-day adjustments and decisions necessary to a good business operation. That’s no surprise; it is the nature of socialism to centralize authority, to distort the price signals of the market, to discourage individual incentive, and to subsidize incompetence. Ironically, most of the schemes for correcting socialistic excess—such as the Kappel plan for the Post Office—really involve creating some of the conditions that prevail as a matter of course in private, profit-minded corporations.
It is also unfortunate that most people think it will take Acts of Congress to give us better mail service. We could have it right now if Congress would only repeal some of the Acts it has already passed. We simply need the freedom to let anybody carry mail. Right now, Tom Murray seems to be doing a great job with the "junk" mail the U. S. Post Office doesn’t want to handle. He might do even better if he could carry all classes of mail. And suppose a few other private carriers also got into the mail-carrying business? Who knows? Even Murray might do better under the lash of competition!
When the sanitation workers of New York City went on strike, the community was confronted with a calamitous pileup of garbage on its streets. Now a late press release tells of the garbage collection troubles of Madrid, Spain. But unlike New York, in Madrid, the sanitation workers of the city have competitors in the form of private garbage collectors.
According to the news report, "Madrid’s 800 prosperous freelance garbage collectors… compete with the Municipal Sanitation Department in this capital of three million people." The freelancers are known in Spanish as the "traperos." They have been an institution of Madrid since the reign of King Charles III in the 18th Century. They are allowed to operate from dawn until 9 a.m. They collect garbage the same as they did in medieval times with donkey-drawn carts. They collect the equivalent of 35 to 70 cents monthly from each customer but that is not all. The trash they collect is a source of income. They use the perishable garbage to feed pigs, other items are sold to a processing plant, furniture and old clothes wind up at Madrid’s flea market. The private enterprise garbage collectors of Madrid earn the equivalent of nearly $200 monthly—a high income in Spain. This compares with an average wage for Madrid’s sanitation workers of $60 to $70 a month.
In garbage collecting, as in every other walk of life, incentive and private enterprise are an unbeatable combination. If the municipal garbage collectors of Madrid go on strike, their private enterprise competitors will likely be only too glad to take up the slack.
From The Skaneateles Press (N.Y.), June 27, ¹968