The Development of Rates of Postage Part 25

The considerations in favour of a degressive rate apply with greater force to parcels of moderate weight than to the comparatively light packets which pa.s.s at the letter rate, and this feature should receive fuller recognition in the determination of parcel rates than has. .h.i.therto been the case.

To sum up: there are important differences between the letter and parcel traffic: (1) the letter traffic is a monopoly in which the more profitable business belongs to the State as well as the unprofitable, while the parcel business is not a monopoly, and any traffic which proves profitable may at once attract private compet.i.tion; (2) in the letter traffic the cost of transmission for a given distance is negligible, and in the parcel traffic it is important; (3) the social arguments which make it desirable for the State to secure as wide as possible a diffusion of letters containing information, of newspapers, books, and samples, do not apply in the same way, or to the same degree, to the traffic in parcels containing goods.

In essentials the case of international rates differs little from that of inland rates. The work in connection with a letter falls into three main divisions: (1) at the place of posting; (2) transmission from place of posting to place of delivery; and (3) at the place of delivery. In the case of inland letters, the first and third factors preponderate to such a degree that their cost alone need be taken into consideration in fixing the rate. The factor of transmission can be ignored. In the case of letters from one country to another, the services at the offices of posting and delivery are performed under different, instead of under the same, administrations, but for all practical purposes are otherwise unaffected. The only factor seriously affected is that of transportation.

The variation in the cost for transportation[652] depends largely on distance, and in that respect various countries are affected in varying degrees, not only as regards the actual distances over which their letters for or from places abroad are sent, but in the way in which those distances compare with the distances over which letters in the inland service are conveyed; and the question therefore wears a different aspect in the different countries. Thus a very large proportion of letters in the British service are forwarded over greater distances than letters in the inland service. The same thing is probably true of France and Germany. Distances in the inland services of the United States and Canada are, however, comparable with the distances in the international services in Europe, and in many cases with distances in their own international services. If, therefore, mere distance of transmission were the only consideration, there would obviously be little to urge against the application of the ordinary penny letter rate for inland transmission, at least to the traffic of the whole of Europe, just as it has been applied to the traffic of the whole of the United States and Canada.[653]

But it is doubtful whether inland distances are really comparable with international distances. The cost of maintaining lines of communication between distant countries is often altogether out of proportion to the quant.i.ty of mails conveyed; and the sums paid, although ostensibly payments for the conveyance of mails, are often really subsidies, paid sometimes in order to a.s.sist the s.h.i.+pping or other industry, sometimes for political purposes.[654] They cannot, therefore, be used as a basis for calculating the amount of postage which should be charged on private letters.

This was particularly the case in earlier times.[655] With the expansion of commerce and the establishment for commercial purposes of regular lines of steamers between the princ.i.p.al countries of the world, the task of the Post Office has been much simplified, and, notwithstanding the growth of mails, the cost actually reduced.[656] It is, however, still heavy, and in some cases the payments include an element of subsidy. The cost of transmission by sea of a foreign letter in the British service is on the average 1/4d. Foreign rates are not, however, fixed on a simple cost basis. The reduction to a penny of the letter rate between Great Britain and all parts of the British Empire; between Great Britain, Egypt, and the United States; and between the United States and Germany and France, has been made from considerations of general advantage, political or otherwise, rather than from considerations of immediate profit or loss on the postal service.

The international parcel post has always been regarded as primarily commercial,[657] and the service has been deliberately restricted to small parcels on the ground that the conduct of an ordinary transportation undertaking is not a postal function, and that the admission of heavy parcels would render impossible the maintenance of the postal principle of uniformity of rate. Parcel mails are in the international service frequently denied the privilege of rapid transmission accorded to letter mails.[658] The developments of the present war have emphasized the essential distinction to be drawn between communications on the one hand, and packages of goods sent by parcel post on the other.

The general basis of postal rates is naturally affected in some degree by the fact that the Post Office is a State undertaking, and the propriety of Government control deserves consideration. Adam Smith, with his individualistic leaning, was bound to touch on the question of a State Post Office. He thought there was no objection to the conduct of the Post Office by the Government,[659] and economists since his day have generally followed his view.[660] This acceptance of State control as theoretically justifiable has probably been induced by the logic of facts rather than by the recognition of any peculiar characteristics tending to that view discoverable in the postal service as an industrial organization.[661]

The transmission and delivery of letters for private individuals may have some affinity to the transmission of official despatches, but in theory such affinity is slight, especially in regard to the transmission and delivery of local letters. Because the Government had found it essential for its own purposes to establish a system of posts, it did not necessarily follow that the Government must a.s.sume also the function of conveying letters for private individuals. But the Post Office is one of those organizations in the case of which the normal influence of economic forces tends to exclude compet.i.tion. Its operations are spread over large areas, and duplication of services over large areas would result in waste of effort and increase of expenses. Competing postal establishments would exhibit the same glaring economic waste as competing arrangements for the supply of gas, water, or electricity. The service thus almost certainly becomes a monopoly; and its nature makes the a.s.sumption of its management by the State advantageous. In times of war, State monopoly of the means of communication (postal, telegraph, telephone, and wireless) is essential. Even if these services were in private hands at the outbreak of war, the first action of the Government would undoubtedly be to a.s.sume control.

A further reason justifying the conduct of the postal service by the Government rather than by private enterprise is that it is a necessity for the State to provide a means for the regular transmission of intelligence by letter of script throughout its territory. If the working of the service were left to private enterprise, it would be certainly confined to such routes as were found profitable, and those parts of the country in which profitable routes could not be established would be left unserved. The State alone can secure the establishment of a complete service, in which regard must not be confined to considerations of mere profit.[662] There are also minor features which render State management peculiarly applicable to the postal service. The actual operations are simple. As Adam Smith said: "There is no mystery in the business."[663] The work is for the most part of a routine character, and calls for no special skill or knowledge. That is not to say that in the performance of the actual duties there is no room for the acquirement of considerable manipulative skill. It means that in principle the chief operations are simple, and may be reduced to routine processes. There is the further important consideration that the operations of the Post Office are intimately connected with the daily life of the people, and are constantly subject to public observation and criticism.

a.s.suming a State parcel service, there is to be considered the question whether that service should be attached to the letter post or whether it would be more economical to set up a separate service. It might appear at first sight that this question has been determined by the practice.

But as the financial scheme of the letter post rests on the fact that the actual transportation of the letters occupies, as regards expense, a quite subsidiary place,[664] it is difficult to discover any special relation between the letter post and a business which is really part of the general transport industry. It may in some instances be advantageous to utilize for parcels the service provided for the transmission and delivery of letters. An organization reaching to all parts of the country is ready to hand, and one which, in rural districts especially, is often not employed to its full capacity. It may therefore in some cases manifestly be economical to give additional work to the service; but, at the same time, the provision of a service for parcels may in other cases add unduly to the cost of the general service--as, for example, when it becomes necessary to make special arrangements on account of occasional variations in the numbers of parcels.[665]

In any case, a postal service should be limited to parcels of moderate size and weight, because the Post Office, as at present organized, is for the most part adapted to the handling of packets which can be delivered by foot-messengers. In rural districts this is almost universally the rule.[666] It is frequently necessary in the towns to separate entirely the parcel post traffic from the ordinary light letter post traffic (except in those parts of the service where the parcel post traffic is very restricted), to provide a separate staff, and to furnish different equipment.[667] In effect, two establishments are maintained.

A separate parcel staff could, of course, collect and deliver traffic of any dimensions or character. But difficulties would arise in regard to the transportation from town to town of heavy parcels,[668] and in rural districts their distribution could not be undertaken without a reorganization of the general arrangements of the mail service. Any sort of regular house-to-house delivery would be enormously expensive. To a large extent--in the United Kingdom at any rate--such a service would be a duplication of services already provided by railway companies, and consequently economically wasteful.

The transportation of parcels is, indeed, in many aspects a service more appropriate to the railways than to the Post Office. The Post Office, for example, is handicapped as compared with the railways by the fact that, while the larger part of its traffic in parcels must under present conditions necessarily be conveyed by railway for some part of the journey, the actual points of despatch and receipt of the parcels by the Post Office are not in the large majority of cases adjacent to the railway stations from or at which the traffic is despatched or received by railway.[669] It is, in consequence, necessary in such cases for the Post Office to provide a service between the respective railway stations and post offices.[670] If the railway companies provided adequate collection and delivery services there would be no need for division of the function with the Post Office. In many districts, however, the railway companies would find the provision of any sort of regular and universal service unremunerative, and this is probably the ultimate reason why the State has found it necessary to intervene. In the United States the introduction of a parcel post, and its extension to heavier parcels, was avowedly in a large degree due to the fact that in many parts of the country the railways, which are in private hands, did not provide any service for parcels. Where a service was provided by the railways, the rates and conditions were not satisfactory, and the establishment of a parcel post represents an attempt to prevent the full application of the principle of charging "what the traffic will bear."

The Post Office, moreover, as a public undertaking, cannot bargain freely for special facilities or terms with individuals or firms having large numbers of parcels for delivery within a limited area. Without such specialization the Post Office must often be unable to offer the most economical service, and private carrying agencies secure the business. In those countries where a parcel post is in operation, the Post Office does not rank as a transportation agency comparable with those of the commercial world. The traffic which it secures is private and personal rather than commercial, to a large degree exceptional traffic which the machinery of the ordinary commercial transportation agencies cannot, or at any rate in general does not, deal with--traffic for remote and isolated residences, spasmodic in character, and, compared with the total traffic in parcels, small in amount.[671] The uniform rate favours such traffic, but the expense to the Post Office is disproportionate to the revenue. From the broader standpoint this is perhaps not altogether loss to the State, since by this means local industries are often brought in touch with markets which could not otherwise be reached, and the rural population is enabled to obtain from the towns many amenities not otherwise procurable.

Viewed in the light of these considerations, and especially of the fact that it is open to compet.i.tion at all points where its rates would prove profitable, it will not appear extraordinary that the parcel post is less successful financially than the letter post.[672] The conditions under which postal business is conducted render it impossible to earmark the expenses properly chargeable to the parcel post, since expenses are for the most part incurred jointly. But the parcel post is to a large extent a secondary service engrafted on the letter post, and is perhaps not properly chargeable with a mathematical proportion of the total cost of the two services based on the relative cost of handling individual letters and individual parcels. Theoretical estimates of the cost of the parcel post must, therefore, be accepted with reserve. But a proved moderate loss on the parcel post would not be conclusive against the propriety of its maintenance. Postal rates are simple, definite, and generally known; and every post office is a receiving agency. It is convenient to use the post, which offers the further advantages of quick transmission, and the greater degree of security attaching to a State inst.i.tution. The line on which a postal service for small parcels can best be justified is that by the utilization of existing machinery for the disposal of additional traffic, not so large as to overburden or disorganize the practical arrangements, a useful public advantage can be secured without inordinate cost. Nevertheless, the parcel post service is not a true postal service, but rather a commercial undertaking.[673]

The question of the legitimacy of State control, which in the case of the letter post is of academic interest only, is therefore of real importance in the case of a parcel service, and those who have a distrust of all State interference in industry may legitimately argue that it should stand aside from the parcel business.

APPENDIXES

APPENDIX A

I. RATES OF INLAND LETTER POSTAGE CHARGED IN ENGLAND, 1635-1915

WITHERINGS' RATES, 1635.

--------------------------------------------------------------- Single Double Letter. Letter. Per ounce.

-------------------------------+---------+---------+----------- Under 80 miles 2d. 4d. 6d.

80 miles and not exceeding 140 4d. 8d. 9d.

Above 140 6d. 12d. 12d.

To or from Scotland 8d. " " Ireland 9d. After 2 ounces, 6d. the ounce.

-------------------------------+---------+--------------------- --Royal Proclamation of 31st July 1635.

This was the introduction of postage in the modern sense. The object of the exceptional rate for Ireland was to avoid interference with a Proclamation recently issued there by the Lord Deputy and Council.

"A single letter is one written on one sheet of paper sealed; a double letter is one sheet of paper which covers another sheet sealed up; a treble letter proportionately."--_Calendar of State Papers_ (_Domestic Series_), 1658, p. 368.

ORDINANCE OF 1657.

--------------------------------------------------------------------------- For every Letter If Single. If Double. Per ounce.

------------------------------------------+----------+----------+---------- s. d. s. d. s. d.

To or from any place within 80 miles of London 0 2 0 4 0 8 At a further distance than 80 miles 0 3 0 6 1 0 To or from Scotland 0 4 0 8 1 6 To or from Ireland 0 6 1 0 2 0 In Ireland-- To or from any place within 10 miles of Dublin 0 2 0 4 0 8 At a further distance than 40 miles 0 4 0 8 1 0 ------------------------------------------+----------+----------+---------- --H. Scobell, _A Collection of Acts and Ordinances_, London, 1658, p. 512.

ACT OF 1660 (12 CAR. II, CAP. 35).

-------------------------------------------------------------- On Single On Double Letter. Letter. Per ounce.

-------------------------------+---------+---------+---------- From London-- d. d. d.

80 miles and under 2 4 8 Above 80 miles 3 6 12 To or from Berwick 3 6 18 From Berwick within Scotland-- 40 miles and under 2 4 8 Above 40 miles 4 8 12 To or from Dublin 6 12 24 From Dublin within Ireland-- 40 miles and under 2 4 8 Above 40 miles 4 8 12 -------------------------------+---------+---------+----------

N.B.--There were no cross posts. Between two towns not on the same post road, however near, letters could circulate only through London, and whenever a letter pa.s.sed through London an additional rate was imposed, e.g. from Bristol to Exeter (less than 80 miles) a letter would be sent via London and charged two rates for over 80 miles.

1711 (9 ANNE, CAP. 10).

-------------------------------------------------------------------- Single. Double. Ounce.

--------------------------------------------+-------+-------+------- From London-- d. d. d.

80 miles and under 3 6 12 Above 80 miles 4 8 16 To Edinburgh 6 12 24 To Dublin 6 12 24 From Edinburgh within Scotland-- 50 miles and under 2 4 8 Above 50 miles and not exceeding 80 miles 3 6 12 Above 80 miles 4 8 16 From Dublin within Ireland-- 40 miles and under 2 4 8 Above 40 miles 4 8 16 --------------------------------------------+-------+-------+-------

The initial charge was raised from 2d. to 3d. The area of the penny post delivery was therefore restricted to the 10-mile circle from the General Post Office. Previously, towns within about 20 miles had been served by the penny post, but an additional penny was charged for all packets delivered in the suburbs.

1765 (5. GEO. III, CAP. 25).

For Great Britain-- Not exceeding one post stage 1d.

For England only-- Over one and not exceeding two stages 2d.

No change was made in other inland rates.

1784 (24 GEO. III, SESS. 2, CAP. 25).

The rates of 1765 were increased by 1d. for a single letter for distances under 150 miles, and 2d. for greater distances.