considerable difficulty. While considerations of public utility would
probably make it undesirable for the State to derive a profit from the
business, they would hardly extend to the point of conducting a large
transportation business at a loss, and the results in England and
Germany show how important and difficult is the problem of fixing
remunerative rates. The rates for newspapers, samples, ordinary printed
matter, etc., have been accorded not solely with reference to the cost
of the service, but on grounds more or less political and social as
regards the fact of granting a privileged rate, and more or less
empirical as regards the fixing of the actual amount of the charge. For
the most part this method has answered sufficiently well, the reason
being that the cost per packet is comparatively small, and the
privileged traffic has not generally assumed large proportions relative
to the letter traffic. These empirical methods cannot, however, be
applied in the case of parcels. The expense of the service performed by
the Post Office is not, as with a letter, actually small, and confined
to that of collection at one end and delivery at the other end of the
journey, with a negligible cost (per packet) for transmission between
the points of origin and destination. Cost of transportation itself
becomes an appreciable item in respect of every parcel. For this
transportation the Post Office is in the main dependent on the railways,
and in the determination of its cost the principles determining ordinary
railway rates must necessarily apply.
Those principles are complex and to a large degree indeterminate. On the
problem of railway and other transport rates many volumes have been
written, and many more will yet be written before a solution is arrived
at.[643] Railways, like the Post Office, are unable to allocate the
actual working costs with any degree of precision between the various
kinds of service they perform. Like the Post Office, they have one
general set of expenses, although they have diverse sources of
revenue.[644] Even if the cost of service could in each case be
definitely ascertained, its adoption as the sole basis of the rates
would prove unsatisfactory.[645] For the most part the principles on
which the rates are actually fixed resolve themselves into a
consideration of "what the traffic will bear," that is to say, the test
by actual observation and computation, strengthened, if need be, by
actual experiment, of the rates which will yield the maximum advantage
to the railway company.
The advantage to the railway conducted under private management may be
defined to be the excess of receipts from the traffic over the
out-of-pocket expenses actually incurred in handling the traffic. To
obtain this maximum it has been found necessary to vary the charge
according to the nature of the goods. Elaborate, detailed
classifications of goods have been arranged with distinct scales of
rates for each class, devised on the basis of charging each kind of
goods with the rate likely to yield to the railway the maximum of
advantage as defined above.[646] Although somewhat crude and a little
empirical, certainly largely arbitrary, this method has been almost
universally adopted for the determination of railway charges.[647]
A characteristic feature of such charges is that account is invariably
taken of the distance over which the goods are transported. In contrast
with this, the principle of uniformity of rate irrespective of distance
has been universally adopted in regard to all postal packets other than
parcels, and to some extent for parcels. The application of the
principle to parcels rests, however, on other grounds than its
application to letters. Sir Rowland Hill himself never contemplated that
the principle was necessarily applicable to all matter which might be
sent by post.[648] The circumstances under which he made his discovery,
and the facts on which he relied, make it plain that, in the absence of
other overpowering considerations, the grounds advanced in the case of
light letters will not justify uniformity of rate irrespective of
distance for packets of considerable weight, which necessarily involve
appreciable cost for transportation. From the financial point of view,
the uniform rate is, moreover, inapplicable to any class of traffic not
secured to the Post Office by monopoly, since private undertakings will
always step in and take away the profitable sections.
For heavy parcels a uniform rate cannot be justified. There are,
however, certain considerations not purely economic which may be held to
justify a uniform rate for small parcels, especially if it be held that
the State may conduct such a business for the advantage of the public,
and abandon to some extent ordinary commercial balancing of cost and
revenue.
Simplicity, afforded in a high degree by the uniform rate, facilitates
the administration and practical conduct of Post Office business, and
is, therefore, desirable, even if a little unjust. Complicated rates are
an unfailing source of irritation to the public as well as a source of
embarrassment to the staff, and there is not much doubt that one feature
of the parcel post which commends it to the public favour is the
simplicity of its rates.[649] There is, moreover, to be considered the
view that it is no part of the duty of the Post Office to provide
services in towns or districts for which private industry gives adequate
services, but rather to cover the whole country, so that the public may
always have ready to hand a means of forwarding small packages of goods
to friends or relatives, or traders to customers, in other parts of the
country. Such a service has many features which distinguish it from
business undertakings of the ordinary type. In this way uniform rates
may prove justified; since if in regard to any local service, or the
service between any two points, the uniform rate, which must necessarily
in certain cases yield considerable profit, is found burdensome, it is
in all such cases open to private industry to provide the remedy. In the
case of light parcels the cost of the services of collection and
delivery is much greater than that of conveyance; and the variation of
the total cost with distance of transmission is small proportionately.
The uniform rate can therefore be fixed near the level of the cost. But
even for such parcels it is economically unsound. It cannot be fixed at
a really low level, because it is to be applicable to a parcel sent
across the whole territory of a postal administration; and with such a
parcel, even if weighing only 1 pound, the cost of transportation is an
appreciable item.
The uniform rate for parcels is an expedient for smooth working rather
than a scientific rate, and against the acceptance of uniformity of rate
as a principle must be placed the fact that railway companies have not
adopted it. The actual results of the uniform rate have not been
altogether satisfactory. The small use of the post for the transmission
of the heavier parcels appears to indicate that the rate for such
parcels is, in general, too high.[650] For local traffic in small towns,
where cost of conveyance is negligible, it is almost prohibitive,[651]
and is much higher than the rates charged by competing agencies.
The considerations in favour of a degressive rate apply with greater
force to parcels of moderate weight than to the comparatively light
packets which pass at the letter rate, and this feature should receive
fuller recognition in the determination of parcel rates than has
hitherto 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 competition; (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
quantity of mails conveyed; and the sums paid, although ostensibly
payments for the conveyance of mails, are often really subsidies, paid
sometimes in order to assist the shipping 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 principal 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 assume 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 competition. 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 assumption 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 assume 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.
Assuming 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 competition 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
institution. 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.