Wednesday, March 24, 2010

USPS: Last Post Standing

The Japanese government announced yesterday that it will begin the process of privatizing Japan Post.  (See: Business Week)  The decision by the Japanese government leaves the United States Postal Service alone as having a business model with many characteristics of a government department.

The following chart illustrates where many of these posts sit on a continuum from government department to a corporation with only private shareholders.     Postal Operators operating as a government department, in a manner similar to the pre-Postal Reorganization Act Post Office would be placed on the far left side of the chart.   A national post with only private sector shareholders would be placed on the far right side. National posts located between the center and the far right sides of the chart all operate as government owned or partially government owned corporations operating under standard or nearly standard corporate, employment, and tax law. 

Once Japanese government sells shares in the its national post to the public, this chart will look particularly unbalanced.  All other posts will fall somewhere between the center and the fully privatized side of the chart.   In the instances of the Swedish, Danish, and Belgium posts, the current positions will likely shift toward privatization once they begin selling shares to the public.

The shift toward privately owned national posts are happening in countries with governments that are considered both left and right of center.   The decision Swedish and Danish governments to begin privatizing their posts reflect concerns that the national operators cannot raise sufficient capital from private debt markets alone to cover capital needs to manage the transition to a business model that is less reliant on document delivery.

In the near term, privatization appears unlikely in Australia, Canada, Finland, France, and New Zealand.  In these countries, cultural norms allow government owned corporation, operating under commercial business, employment, and tax laws to fully or nearly fully compete with the private sector.  In some of these countries, privatization would be politically unpopular.  In others, there is no political drive to privatize the national post and postal management has not expressed a need for the capital that selling shares would provide.

Privatization is off the table for the Postal Service until its finances improve.   This chart illustrates that privatization is unlikely to remain off the table for ever.


Ben said...

This strikes me as somewhat odd -- the USPS is as "privatized" as Canada, France, or many of the other posts listed as in between.

USPS is a gov't owned corporation, and has been since the early 70's. The French Post, on the other hand, only achieved this distinction last year.

Also, Japan Post's privatization has basically nothing to do with the "postal" part of the operations. Japan Post also happens to be the country's largest bank, and privatization is an effort to get the government out of the banking business.

Alan Robinson said...


The difference is governmental control. While the USPS is technically independent, it still is under the control of Congress, still operates under most civil service employment law, contract law based on government contract law ans pays no taxes. Also all of these posts that are "owned by the government outside of the US, have nearly complete freedom to manage the business raise debt capital, pay employees, and negotiate with unions under standard labor law. That is very different.

Anonymous said...

The main thing unbalanced here is the authors objectivity.

Carrier said...

Being a postal employee for 17 years now , I just can't fathom another entity coming in and taking over the USPS . The scale of the network of the USPS is incomparable to any other postal system in the world . How could a company raise enough capital to take over this business . The value of USPS has to be in the billions of dollars . You just can't realistically compare the USPS with the postal business of any other country . Therefore I believe that the USPS will never be privatized .

Anonymous said...

Alan, I think your major point is that which USPS, you, and Murray Comarow have been pointing out: the amount of regulatory/government(both Congress and Administrations-past and present)is what causes you to put the USPS on the left side of the table. Ben is correct about the Japan Post.
I agree with Murray: for the long run, Congress needs to stop trying to micro-manage the USPS network of processing centers and post offices(albeit some outlying po's should provide service if no rural delivery is available); there should not be a Postal Regulatory Commission - the Board of Governors should be held accountable for managing finances and prices; and, finally, if management were given responsibility for setting wages and benefits, I believe, since we always depended on our people's commitment to service and efficiency, that they would balance the interest of the customers and employees much better than an arbitrator can.

A Retired CFO