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                       Monopoly of the Postal Service
         In the United States economy most markets can be classified
 into four different markets structures. But, each and every market in
 the United States is completely unique from the others. Generally the
 best type of market structure for the general public is per-fect
 competition because it creates the lowest possible price for the
 public. There are some exceptions were perfect competition isnÕt the
 best choice for the public on account of various reasons. The United
 States Postal Service is one of them and since the Postal Service is a
 monopoly, it is its own market. This paper will discuss the budget
 dilemmas that the postal service has faced for the past twenty years
 and if it is in the best interest of the economy for the United States
 Postal Service to continue as a monopoly.
         The first time there was talk of privatizing the Postal
 Service was in 1979 when the Postal Service was losing vast amounts of
 money in the long run. But since the Postal Service is a necessity for
 America, the government had to subsidize the service in order for it
 to continue in operation. In 1979 the United States Postal Service had
 a cash flow of $22.5 Billion and was additionally receiving $176
 million from investing(#1, Intro). Even with this added revenue the
 Postal Service was still greatly under funded on its own (#1, Intro).
 During this time it was discussed to privatize the postal service and
 introduce competition because of the extreme losses that the service
 was experiencing. A positive argument for privatizing the Postal
 Service was with numerous competitors in the market there would be
 more efficiency and the public would receive lower prices. But this
 would also increase the usage of resources, for example airplanes and
 cars. One of the problems the Post Office had was its receipts from
 consumer purchases that were submitted the next day after the
 transaction (#1, i). If the receipts were submitted earlier the postal
 service would receive more money because they could invest that money
 sooner (#1, i).  Another way the Postal Service could increased
 profits was by competitively selecting banks that would give them
 higher interest rates and such (#1, ii). Probably the most relevant
 and final way to improve the budget of the Postal Service is to
 improve the bookkeeping poli-cies and banking techniques (#1, ii).
         Not only did the Post Service propose to increase profits but
 they also proposed to cut costs in a number of ways. There were three
 methods that were proposed in 1946 for the protection of salaries that
 no longer exists (#2, Intro). These have to do with the rural mail
 carriers.  Under this antiquated method of delivering mail the Postal
 Service was los-ing money to any mail that went to "rural" areas (#2,
 i) There are 48,000 mail carriers that deliver mail to millions of
 families that are considered to be living in rural settings; this
 costs the postal Service 858 million dollars a year (#2, i). This is a
 fairly easy problem to fix considering how much money is being lost.
 It was proposed that money loss could be significantly cut down if the
 Postal Service corrected the following problems. The rural mail
 carriers were assigned a certain amount of time to deliver to a
 specific rural area, this method was out of date and because of this
 the carriers have free time for which they got paid for (#2, ii). The
 next problem was that other mail routes based pay on how many miles
 the route covered, so the carriers were getting paid by the mile (#2,
 iii). With this problem fixed the Postal Service could saved 26.8
 million a year (#2, iii).  There was also an hourly rate that was in
 effect which indirectly promoted inefficient service (#2, iii). A stop
 to this could have saved the Postal Service $255,000 a year (#2, iii).
 From the num-bers mentioned above, it can be seen why the United
 States Postal Service was losing so much money.
         These problems did indeed eventually did get solved over the
 past fifteen years and now the Postal Service is making record
 breaking profits. Now in the first quarter of the fiscal year 1996 the
 Postal Service already has a net income of $1.2 billion (#3, 1). Now
 not only is the Postal Service just breaking even, but they are also
 making a profit. On top of that, the 1.2 billion dollar figure is 115
 billion dollars better then the quarterly forecast predicted (#3,1).
 It is incredible that they are not only making a reasonable profit but
 it is increasing over the years. The Postal Service is also now
 reducing debts. An example of this is when the Postal Service redeemed
 a 1.5 billion dollar loan two years in advance which will save them 22
 million dollars of interest in the next two years (#3,1).
         The Postal Service isnÕt stopping with the revenue that it is
 receiving now. The Postal Service is planning to increase its
 international revenues of $1.2 billion by twice the amount in the next
 five years and ten-fold by the year 2005 (#5, 1). The Postal Service
 is continually working to "streamline" their operations for the future
 that they are now run-ning. The Postal Service is continualy looking
 to cut back on borrowing money. All of the recent financial borrowing
 has been through the Federal Financing Bank, but the Postal Service
 now is looking into outside sources, such as bonds in the public
 markets (#5, 2). Business are starting to get jealous of the Postal
 Service because of the great prof-its it is experiencing. The Postal
 Service is now making a major impact on the United States Economy (#6,
 1). Business are pointing out that in 1995 the Postal Service had
 records of $1.8 billion in net income and a 1.7 billion dollar debt
 reduction (#6, 1). The $54 billion revenue that the Postal Service is
 bringing in would put them in 12th place on the Fortune 500 list and
 33rd on the Fortune Global 500, with the worlds largest corpora-tions
 (#6,1). A recent study showed that domestic direct mail sales were at
 $333 billion in the year 1994 (#6,1). This figure is expected to reach
 over $500 billion by the year 2000 (#6,1).
         It can be seen throughout this paper how the United States
 Postal Service in-creased profits and does not have to borrow as much
 money as before. It seems that the Postal Service is doing just fine
 while it is a monopoly. But there are still two arguments for and
 against the Postal Service continuing to remain a monopoly. On one
 side compe-tition is thought to make industries in the market more
 efficient and practice more innova-tive (#4, 1). But on the other hand
 the competition is also thought to lead to "a wide-spread cream
 skimming, with the postal service left only the high-cost,
 unprofitable markets (#4, 1)." So who is to know which market would be
 better for the American economy as far as the Postal Service goes. But
 it is speculated if the United States Postal Service does keep
 increasing its profits over the years, maybe it will be privatized.
 1) United States. "General Accounting Office, Changes in the U.S.
 Postal Service's cash management practices could increase income and
 reduce cost": report / by the U.S. General Accounting Office,
 Washington: General Accounting Office,","1979
 2) United States. General Accounting Office, "Changes needed in the
 United States Postal Service's rural carrier pay systems": report / by
 the U.S. General Account-ing Office, Washington: General Accounting
 Office, 1978
 3) http://www.usps.gov/news/press/96/96002new.htm
 4) http://nutcweb.tpc.nwu.edu/research/abstracts/i.2.html
 5) http://www.usps.gov/news/press/95/95090new.htm
 6) http://www.usps.gov/news/press/95/95095new.htm
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