If you’ve been following the US Postal Service’s various travails, you’ll be interested in Sasha Issenberg’s profile of Swiss Post in Issue 30 of Monocle. Unfortunately, it’s a subscriber-only piece, but this is a flavor of it:

Facing diminishing demand for its core service, Swiss Post has emerged as a model for state-owned utilities looking to remain relevant. It is reimagining itself as a global media and technology company, both competing and collaborating with some of Switzerland’s largest publishers, banks and tech start-ups. Swiss Post executives see themselves on unique turf at the intersection of data networks and the old-fashioned letter routes, with the ability to carve out an unrivalled position in the digital age. “We believe we are in the communication business, not just in the physical letter-mail business,” says executive vice president Frank Marthaler. “The internet is a fantastic place, and we want to work with the internet and not against the internet.”

Swiss Post was created in 1997, when the government split the postal and telecom functions from the country’s PTT utility. Nine years later, the Swiss parliament abolished the company’s parcel monopoly, and is now considering a bill that would do the same in the domestic letter business. Yet instead of fearing private-sector competition, Swiss Post is moving into new spheres.

Basically, Swiss Post was given additional flexibility about its business model and has been able to adapt to a changing landscape even while remaining a state-owned postal service. This seems to be basically what Postmaster General Potter is looking to do, but the Post reports that “As for Postal Service plans to sell banking, insurance and cellphone services through post offices, the consultants point to the agency’s lack of start-up funds and inability to afford potential short-term losses.” I’m not sure how Swiss Post got around this. What’s needed, presumably, is some way to access private capital markets without changing the USPS’ underlying ownership structure—some kind of joint venture model perhaps.

It’s worth emphasizing that though the downward trajectory for the USPS’s core business is real enough, the multi-billion dollar losses you see in the news are largely a result of an accounting rule related to prepayment of retiree health benefits. I didn’t realize this during the round of “USPS budget disaster” stories a few months ago, but it’s a key piece of context.

Ezra Klein notes that in terms of number of outlets it’s the United States Postal Service:

Rep. Stephen F. Lynch (D-Mass.), chairman of the subcommittee on the federal workforce, Postal Service and the District of Columbia, noted that Postmaster General Jack Potter, who wasn’t at the hearing, likes to point out that the agency has more retail outlets than McDonald’s, Starbucks and Wal-Mart combined.

One approach you could take to the Postal Service’s problems, of course, would be to privatize it. Repeal their legislative monopoly on delivery of “ordinary” mail, repeal their legislative universal service obligation, and sell the thing to private investors. As run by the government, the USPS loses money, but I bet it would have significant value on the market. And the USPS’ massive real estate portfolio would be one of the key reasons. The politics of the situation make it basically impossible to manage these holdings in an economically rational way—nobody wants to see their local post office closed or relocated to someplace less convenient even if that’s what makes the most sense to do. And you see something similar with the controversy over halting Saturday delivery. Right now congress wants to make the USPS financially self-supporting, but doesn’t want to let USPS be managed the way an entity that’s actually financially self-supporting would be managed. Which is fine if you think that daily delivery of paper mail is a critical public service—critical public services shouldn’t be managed as profit-maximizing entities—but in 2009 does the delivery of paper mail really count as a critical public service?

Postal van in Sundsvall, Sweden (wikimedia)

When considering a policy issue like the quality of mail delivery it’s often intriguing to ask oneself “how is this done in Scandinavia?” What appears to be the case is that the government of Denmark quasi-privatized its postal services, creating an independent corporation called Post Danmark that’s partially owned by a private equity firm, partially owned by the firm’s employees, and partially owned by the Danish state.

Meanwhile, Sweden has a state-run postal agency but a deregulated market in postal services. So the state-owned Posten AB needs to compete with a firm called Bring CityMail. Bring CityMail operates as a private company in Denmark and Sweden, but it’s actually a subsidiary of the Norwegian state postal service. Meanwhile, in order to better compete with this Norwegian juggernaut, Sweden’s publicly owned postal service and Denmark’s semi-public postal service are merging to form Posten Norden AB. This is going to be organized as a private firm, though a large share of the ownership will be in the hands of the Danish and Swedish governments.

International mergers of postal agencies seem to have a certain logic when you’re talking about very small countries that doesn’t necessarily apply to the United States. But I would say that one key thing here relates not so much to state ownership versus non-ownership, but to a regulatory climate that seems designed to promote meaningful competition between different mail delivery services regardless of ownership structure.

Of course part of the story with the USPS is that it’s a way of having the majority of Americans who live in metropolitan area subsidize the rural minority. I assume this same issue exists in Sweden and Norway which contain US-esque large sparsely populated hinterlands and I don’t know how they handle it. Providing subsidies for rural living doesn’t strike me as a particularly worthwhile policy objective, but given the strongly pro-rural bias of our political institutions it doesn’t seem avoidable either.

Jack123 asks “Five days of mail delivery – Good or Bad?” The reference being to the idea of eliminating Saturday mail delivery as a cost-cutting measure. To which I say basically: Eh.

When our country was founded, timely delivery of the mail was a critical piece of infrastructure and not something the private sector was ready to do. Modern conditions have led to the emergence of viable private sector parcel delivery firms, and have also led to a sharp decline in dependence on parcel delivery as a critical mode of communications. There’s the phone, fax, e-mail, etc along with UPS, DHL, FedEx, and the US Postal Service. The USPS is a useful entity in that mix, but modern-day conditions mean that postal policies don’t really matter in the way they once did.

One thing I do like about the idea of five-day delivery is that six-day delivery seemed like an odd form of established Christianity. Lots of things are open Monday-Friday, but to be open Monday-Saturday seemed to imply that we couldn’t deliver on Sundays because everyone’s at church.

Something I wonder about that’s perhaps more interesting is whether there isn’t a case for trying to privatize the Postal Service by selling it off to private investors. Presumably you wouldn’t want to do that in the middle of a financial panic, because you’d get low bids. But in general, though I understand why the USPS was established as a public agency in the past, it’s not obvious to me that if it didn’t exist today we’d be clamoring to create it.

This article from Bruce Bartlett about the case for an Investment Tax Credit is pretty interesting. But this is a pet peeve of mine:

Historically, government-directed investment has been very inefficient. That’s why Amtrak and the Post Office don’t work very well and why there was a privatization movement in the 1980s and 1990s, which led governments everywhere to sell their state-owned enterprises.

As for Amtrak, if you compare passenger rail in the US to passenger rail in Europe and Japan it’s pretty clear that the difference isn’t that government-directed investment doesn’t work, it’s that Europe and Japan have decided to invest a lot in passenger rail and we haven’t. As for the US Postal Service, at the end of the day it does a pretty darn good job. Want to send a letter somewhere? Put it in an envelop and stick it in a box, and it’ll go where you wanted it to go. They’ll pick the letter up from your house if you want it, and hand-deliver it to the destination. For not much money! Anywhere in the country!What you can say about the Postal Service is that in the modern day it’s not clearly necessary to have a public agency guaranteeing the availability of this service in the way that it was before phones and email. But for quite a long time this was a really mission-critical element in our communications infrastructure and it still works just fine.