Privatization is Not Free

Privatization of the Postal Service has received recent attention in a speech by Governor Tim Pawlenty and the editorial page of the Washington Post.    Neither presentation provided any indication of an understanding regarding what it would take to privatize the Postal Service either legally or financially.

In an earlier post commenting on Governor Pawlenty's speech, I noted that privatization would likely require resolving the retiree issues in the Postal Service's favor. 

Confirmation of that conclusion is coming from Great Britain.  The Financial Times reports that Ed Davey, postal affairs minister, told the Commons that, to put Royal Mail on a sustainable commercial footing, its balance sheet would need to be restructured to “significantly reduce” the company’s £1.7bn debt to the government.


That would be on top of taking over Royal Mail’s £8.4bn pension deficit. Officials said the scale of the capital injection would be determined by talks with the Commission, coupled with the company’s finances and market conditions.    

In total, the British government is expected to forgive debt or take over obligations of around $16 billion U.S.   This is to privatize an enterprise that generates one quarter the revenue of the Postal Service. 

Privatization may be what the Postal Service requires, but before the idea is to taken seriously more work is needed to understand what privatization would require legally and financially.