Private Mail could be a public boon; M. D. Barger

PRIVATE MAIL could be a public boon MELVIN D. BARGER THE POSTMAN is figuratively ring ing twice in a number of Amer ican cities these days. One of the rings could he sweet music to citi zens angered by the growing prob lems 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 com munications 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 Mr. Barger is a public relations representative in Jackson, Michigan. IPSA jetting ahead into the bil lion-dollar class. Murray, a rest less, entrepreneurial type, could be accused of exaggeration, except for several interesting facts. One, IPSA has already landed enough sales to produce $1 million in prof its during its first year of opera tion. 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 con structi ve change.

The last item may turn out to be a matter· of considerable im portance 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 gov ernment had the competence to 3 4 THE FREEMAN January carry mail. A suggestion that pri vate corporations could handle postal services with greater effi ciency and economy was often hooted down; it was like suggest ing 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 deteri orating, or at least not keeping up with the noticeable advances in other services (such as the tele phone system). The yearly postal deficits are always well-publicized, causing people to wonder fre quently "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. At tempts to raise third-class rates have enraged business mailers, and efforts to change the admit tedly low rates for publishers has probably contributed something to the bad press the Post Office has been getting.

There may also be some disillu sionment over the frequent cru sades 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 Postmas ter General. Summerfield did make some needed improvements in us ing private capital to provide for new post office building construc tion, but he also incurred the hos tility of the postal unions and faced considerable political oppo sition to many of his plans. Sum merfield's reign at the Post Office proved that the Department's problems couldn't be solved simp ly by putting an astute business man in the head chair. The Kappel Proposal The latest ploy in the attempt to buck up the faltering Post Of fice was the proposal by the Kap pel Commission to put the Depart ment under a government corpo ration. Mr. Kappel, the retired board chairman of the giant American Telephone and Tele graph Company, was doubtlessly chosen to study the Post Office be cause of his own impressive ca reer in a related communications field. The Kappel proposal now has the endorsement and active back ing 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 1970 PRIVATE MAIL COULD BE A PUBLIC BOON 5 administered, with less interfer ence from Congress and more con trol over its own operations. How ever, the Kappel recommendation is essentially an attempt to remedy the shortcomings of a socialistic enterprise by converting it to an other organizational form; it still rests on the delusion that social ism can be made to work if only the right combination of manage ment and organization can be found. The question of private owner ship of the Post Office did get an airing by Mr. Kappel, who dis missed the idea of selling the Post Office. because, with the Post Of fice's deficit, liabilities, and invest ment needs, "you couldn't sell it to anybody." The fact that the question of ('selling" the Post Office was even lsked shows that there's growing interest in a private postal sys sem. Mr. Kappel's answer re vealed the philosophical limita dons of a man who has spent his )wn lifetime in a monopolistic ~nterprise, albeit a highly success :ul one. He did not seem to be ;hinking of the possibility that )ostal services could be supplied Jy new organizations, not just the lne now in existence. He apparent y could not bring himself to the )oint of proposing that anybody )ught to be allowed to carry any ~lass of mail, that mail deliveries should not be a legal monopoly of either a public or a private or ganiza tion.

From Bellboy to Mailman Against this background of mounting dissatisfaction with the Post Office, Tom Murray's Inde pendent system has come into ex istence. Murray had no previous postal experience and would have had trouble getting a minor posi tion 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, how ever, he had become manager, and after that his rise was spectacular. The Mayor of Detroit actually pro claimed 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 in dicated that a private company might be able to carry third-class 6 THE FREEMAN January mail at lower rates than the gov ernment and still make a profit! The figures fired Murray's imagination, particularly the busi ness 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 middIe of the last century had been driven out of business by the Fed eral Private Express Statutes.

How could Murray work his way around statutes that had barredi other businessmen from the mails: for so long? His door. of entry was third class mail, ~hich has been shrilly condemned as "j unk mail" in re-! cent years and at times has beeti held responsible for many of the' Post Office Department's problems: There's a fine line between "third~ class" mail and circulars. A busi.' ness firm for example, has thE: legal right to deliver printed ma; terial to residences, but not to usc: the mailboxes. Murray dashed of to a Third-class Mailers' conven~ tion, and listened to their gripe: and problems, and also found then receptive to the idea of a privat; delivery system. "I felt that the Third-clas: 1970 PRIVATE MAIL COULD BE A PUBLIC BOON 7 Mailers had made a maj or 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 tra.ck, Murray found a group of backers who could put up $50,000 immediately and underwrite an additional $2 million for later ex pansion. By January, 1968, he had incorporated IPSA, opened. offices in Oklahoma City, and announced plans to begin service in Febru ary. Deliveries would begin in the city, and then fan out to nearby states, with the long-range goal of becoming nationwide. As if to em phasize the nationwide goal, Mur ray chose an outline map of the U. ,S. for the system's trademark and insignia. Disposable Mailboxes Announcement of the daring lenture captured the public inter ~st; yet it also seemed a too-risky ~xercise in audacity. Newsweek nagazine called it a. "showdown" vith the Post Office, and hinted ,hat Murray would be blocked by rederal authorities. Reporting hat Murray had already signed lelivery contracts with a rubber ~rm and an insurance company, Iewsweek also cited a Post Office )epartment legal counsel's opinion o the effect that Murray's operations were illegal, that nobody but the Post Office has the right to carry any class of mail. The maga zine also suggested that Murray would be courting real trouble when he began making delivery in home mailboxes.

If. there was any showdown, no body 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 chal lenging the Post Office Department ruling on use of home mailboxes, and developed an attractive plas tic container which can be sus pended from most doorknobs. The container not only protects the mail and other articles, but one side also serves as an advertise ment for the Independent System. The other side has been sold as an advertisement for other firms, ac tually making the plastic container a profit item instead of an addi tional cost burden. IPSA would still like to use private mailboxes and is currently trying to get ap proval of a dual-compartment type, but the plastic bag is doing very well for the time being. Murray's customer list multi plied almost magically, and by the end of the first year the system had served more than 100 clients and was operating in every major 8 THE FREEMAN January Oklahoma city as well as commu nities in Texas, Missouri, Ohio, Arkansas, Alabama, Mississippi, Illinois, New York, and even Can ada. The company was expanded rapidly by selling franchises, and received hundreds of inquiries from private individuals seeking their own postmasterships. 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 opera tions 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 Sys tem an edge, allowing it to take business away from the govern ment 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 2V2 ounce item, for example, can be delivered by IPSA for 3.3¢, versus 3.8¢ for the U. S. rate. More important, IPSA can guar antee a specific delivery date, which many business mailers such as local retailers must have in pub licizing 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 business like 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. I Until now, it has been the busi ness 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, al though nobody can prove it be cause the Federal system has nc systematic approach to its OWl costs and cannot say for certaiI 1970 PRIVATE MAIL COULD BE A PUBLIC BOON 9 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 ap pealed to the same Congress to make up its annual "deficit." Even the deficit has been something of a myth, however, because the De partment doesn't follow customary accounting practices for its over all 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 indi cations that Congress will be will ing to make them any higher.

The Uncertain future Where will it all end? Will Mur ray's Independent System contin ue to flourish and grow until it replaces the Federal Post Office? Or will the two systems continue to operate side-by-side, with Mur ray'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 depart ment 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 Mur ray'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 vic tory for free enterprise, and would finally give libertarians a chance to prove on a wide basis what they have always contended: that pri vate businessmen can deliver the mail for a profit and give the con sumer the same efficient service he p:-ets in the delivery of other items.

Some persons believe that a pri vate 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 bu reaucracy, and the officials and others ,vorking in the system, even if somehow they could know what ought to be done, are power less to make the necessary changes. They simply can't make and carry out the day-to-day ad j ustments and decisions necessary to a good business operation. That's no surprise; it is the na ture of socialism to centralize au thority, to distort the price signals of the market, to discourage indi vidual incentive, and to subsidize incompetence. Ironically, most of the schemes for correcting social istic excess - such as the Kappel 10 THE FREEMAN January plan for the Post Office-really in volve creating some of the condi tions 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 freedam' to let anybody carry mail. Right now, Tom Murray seems to be doing a great job with the "j unk" mail the U. S. Post Office doesn't want to handle. He might do even better if he could carryall 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 com petition! , IDEAS ON LIBERTY Unbeatable Combination WHEN the sanitation workers of New York City went on strike, the community was confronted with a calamitous pileup of gar bage 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 free lance garbage collectors ... compete with the "Municipal Sanita tion 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 medi eval 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 perish able 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 pri vate enterprise competitors will likely be only too glad to take up the slack.

From The Skaneateles Press (N.Y.), June 27, 1968 FOB,EC..&.STXZ\TaHANS F. SENNHOLZ MANY business forecasters and market analysts don't realize that they owe their jobs to government. Their profession was born with the first depression that engulfed an economy. And since depressions are the inevitable consequence of inflation and credit expansion, which are deliberate government actions, all occupations and call ings that are concerned with the business cycle ultimately owe their existence to government. As a cer tified public accountant earns his livelihood from the complexities of onerous taxation, so does. the mar ket forecaster and business econ omist derive his support from gov ernment policies that generate economic booms and busts. Dr. Sennholz heads the Department of Eco nomics at Grove City College in Pennsylvania and is a noted writer and lecturer for freedom. Businessmen want to know where they are in the cycle. In particular, they would like to know the time when a boom turns to a bust, the date of the break, length and depth of depression, the be ginning of recovery, and so on.