Tuesday, June 24, 2008

Going privately postal

/ letters to nowhere /
The EU commission warns over "ploys" to protect public postal services, meaning attempts to minimize public cost. These ploys include apparently wildly unreasonable demands:

...Finland has in theory opened its market to full competition but insists on a fee from new entrants if they won't offer their service across all the territory, the official said.

"That, for us, is a freedom of establishment issue," the official added, referring to a plank of EU law that can be mobilised to stop a country hindering competition.

Brussels is also concerned about "protectionist thoughts" in Belgium where a plan is mooted to make all new entrants offer a service across the entire country, a costly undertaking...

Any attempts to "impose" universal service, are thus deemed unacceptable by the folks in the EU commission (the sensitivity of whom to public sentiment and common sense in the EU will virtually guarantee that any EU related issue put to referendum will fail). As the Apostate Windbag has explained some while ago:

So if the directive supposedly guarantees universal service provision, how exactly will the market provide?

The answer is it won’t, as, again, the Commission admits. In order to ensure universal service provision member states ‘may choose’ from a range of different options: state aid (subsidizing private businesses), public procurement, compensation funds or cost-sharing. In other words, recognizing that private providers will be extremely reluctant to provide loss-making services, the Commission has concluded that to continue to ensure universal service provision, governments will still have to pay for it.

Essentially, we are selling the goose that lays the golden egg. While still having to fund universal provision of service, governments will no longer have the subsidy for this service that business-originated and parcel post previously provided.

But what's the empirical evidence regarding the mythical beast called "benefits to the consumer" the appearance of which precedes but rarely follows privatisations the world over? In the British case, a recent report is rather unequivocal, and I'll let the impeccably unsocialist Telegraph, summarize it as "'No benefit' to opening up mail market":

Opening up the postal market to competition has undermined the future of the Royal Mail and provided “no significant benefit” to consumers or small businesses, a report has said.

It found that since liberalisation individual customers had no more choice in who delivered their letter, but were now faced with a complicated sizing and pricing system.

The review, by a Government-appointed panel, also warned that ending the Royal Mail’s monopoly posed a “substantial threat” to the financial stability of the company and the universal postal service in general.

The Telegraph puts it even more explicitly in a related article eloquently titled "Royal Mail privatisation 'hurts customers'":

Posting a letter has become more expensive and more difficult since the market was opened to competition, a government-backed report said yesterday.

Individual Royal Mail customers now have to contend with higher stamp prices and a complicated sizing system as a result of liberalisation, which has provided them with "no significant benefit".

Seumas Milne notes in the Guardian that:

"...The farce of [Labour's] claims [about the effectiveness of its policies] couldn't have been more clearly demonstrated than in the liberalisation and creeping privatisation of Britain's postal service. Far from "working" or delivering the goods, the corporate-skewed opening up of the market is progressively destroying a publicly owned network at the heart of Britain's social and business life. When New Labour came to power, the Post Office was an effective public monopoly handing over more than £100m profit a year to the public purse. Public and political support saw off successive attempts by the Tories and, more tentatively, Tony Blair to privatise what had become Royal Mail.

But eight years after New Labour began exposing the network to private competition and two years after Royal Mail's 350-year-old monopoly was finally abandoned, the postal service is in crisis and the universal service which guarantees delivery of mail anywhere in the country at a single price is in peril..."

Failures however can always be explained by arguing that reforms haven't been deep enough, or that any shortcomings are temporary etc - while governments are advised to leave the services up for privatisation to rot for a while, so that a demand for reform will make privatisation seem sensible. Local developments of course couldn't be allowed to trail behind.

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