Last week, the United States Postal Service announced that it would be ending Saturday deliveries in an effort to stop massive losses. While there was much discussion of the move, there was no significant discussion of why there is a government monopoly of delivering mail in the first place, and what reason, if any, there might be for not turning over such a civic function to the private sector.
Let us consider a challenge that was made to the state monopoly on postal service in an earlier period of American history. In 1844, a young lawyer named Lysander Spooner began to study the current status of mail delivery in the United States. He found that sending a letter from Boston to New York City cost 18.75 cents, and sending a letter from Boston to Washington, DC cost 25 cents. In 2012 dollars, this would be $5.68 from Boston to New York City and $7.58 from Boston to Washington, DC. The cost of mailing letters was so high that a barrel of flour cost only 50% more to ship than a simple letter.
Upon these discoveries, Spooner decided to compete with the U.S. government by forming the American Letter Mail Company. While Article I, Section 8 of the U.S. Constitution did give Congress the power to create post offices and post roads, it did not forbid private enterprise from competing with the government-run service. The ALMC offered to deliver letters at much lower rates than those offered by the USPS. Spooner ran the following advertisment on the front page of the New York Daily Tribune with the following information:
"AMERICAN POST OFFICE – The American Letter Mail Company has established post offices in New York, Philadelphia, Baltimore and Boston, and will deliver letter daily from each city to the others – twice a day between New York and Philadelphia. Postage 6 1/4 cents per each half-ounce, payable in advance always. Stamps 20 for a dollar. Their purpose is to carry letters by the most rapid conveyances, and at the cheapest rates and to extend their operations (as fast as patronage will justify) over the principal routes of the country, so as to give the public the most extensive facilities for correspondence that can be afforded at a uniform rate. The Company design also (if sustained by the public) is to thoroughly agitate the questions, and test the Constitutional right of the competition in the business of carrying letters – the ground on which they assert this right are published and for sale at the post offices in pamphlet form."
While the public was quite relieved to see lower postal rates, government officials of the time were none too happy about "that Spooner's shenanigans." USPS revenues took a nose dive while the ALMC gained much of the mail business in the areas where it operated. Soon, lawsuits began to be filed on behalf of the USPS against Spooner's mail service. Some victories were to be had on both sides; in one case, an ALMC worker was found guilty and fined for transportation of letters in a railroad car over a post road of the United States; in another case, a U.S. District Judge advised a jury that owners of conveyances were not liable under law if, unknown to the owners, a private letter carrier brought mail aboard a train or steamboat. The "not guilty" verdict in this case was sustained by the U.S. Circuit Court, which expressed doubt that the government had the right to monopolize the transportation of mail, as the Constitution does not expressly grant the right to the federal government.
Eventually, competition from Spooner's company forced the Postmaster General to ask Congress for the authority to lower postage rates. The Postal Act of 1845 lowered rates for letters weighing under 0.5 ounces and being sent under 300 miles to five cents. But Spooner and his company kept competing, driving postage stamp prices down to three cents. By 1851, members of Congress and the U.S. Postal System had had enough, and decided to outlaw private competition with the Postal Act of 1851. This law effectively ended the American Letter Mail Company, but the point that a private postal system was more efficient and cost-effective than a state monopoly had been proven beyond a reasonable doubt. Perhaps such a private company could again provide an efficient and cost-effective mail delivery service, if only the state would get out of the way.