Monopoly Of The Postal Servece Essay

This essay has a total of 1237 words and 6 pages.

Monopoly Of The Postal Servece



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 perfect competition because it creates the lowest
possible price for the public. There are some exceptions were perfect
competition isn't 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 increase 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 policies 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 losing 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 (#2, iii). With this problem fixed the Postal Service
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 numbers
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
Continues for 3 more pages >>




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