Perils of Parcels Post Extension. pp. 13-31.
George H. Maxwell.
A Heavy Deficit Inevitable
The commercial advocates of larger bulk and lower rates by domestic parcels post for the shipment of merchandise by mail do not want either a distance rate or a system limited by territorial zones. They want the privilege of shipping from any factory or central store or warehouse, wherever located, anywhere in the United States, to any customer or consumer, at any postoffice, however remote or inaccessible, in any state or territory. The rate desired is a flat rate of so much per pound without regard to distance.
It is urged that the same rate should be charged by Uncle Sam for carrying merchandise by parcels post from a New England factory to the distant mountain mining camps in Idaho or Oregon, or to the prairie towns of Texas, as would be charged for delivering the same package from the same factory by local trolley car service to a nearby postoffice in the immediate suburbs of the New England city where the factory happened to be located.
Government Bears the Burden
The national government in each and every case would pay the full actual cost of transportation and delivery to the point of destination, whether it were by trolley, railroad, stage-coach, wagon, pack-horse, mule, sled or snowshoes. Of course it is not contended that the government could secure an average or flat rate for the cost to it of transporting merchandise by mail, the same to all points in the United States, as it is urged that it should charge. On every package mailed the government would of necessity pay the full cost of carrying it from the point of shipment by mail to the place of delivery to the consignee, no matter how great the distance or how costly the character of the transportation.
In other words, while the government is expected to and of course must itself pay the full distance cost of transportation and delivery in every case, and could not give the service unless it did so, it is expected to look for reimbursement wholly to an average flat rate, like the rate for letter postage, or the present rate of the existing domestic parcels post for small parcels—a rate that is the same everywhere, without regard to the distance from point of mailing to point of destination.
Averages Are Misleading
The argument of averages is relied on to meet this insuperable objection. It has been suggested that the average haul of all second-class matter (which comprises only regularly entered publications, periodicals and magazines) was 540 miles in 1907, as shown by the report of the Postoffice Department, and on that as a basis it was estimated that an average rate of 5½ cents per pound or $29.70 per ton for other transportation charges, and $165.00 for labor and supplies, a total of $212.00 a ton, would leave a profit to the government of $27.00 a ton from a general parcels post rate of 12 cents a pound, which would produce a revenue of $240 a ton.
The estimates given above were embodied in an address by the Postmaster General before the Union League Club at Philadelphia on October 26, 1907.
For reasons based on facts that are undeniable and unquestionable, these averages and the estimates based on them, would prove utterly delusive and misleading when put to the test of a practical application of the proposed extension of the domestic parcels post to include merchandise in larger bulk and at lower rates than those now authorized by the postal laws. It is not necessary that the proposed extensions should be actually tried to demonstrate the deceptiveness of these average estimates. The conditions are before us and arise from facts so clearly known and established that he who runs may read.
The Average Haul
The average haul of second-class mail matter, made up of printed reading matter, for every copy of which a regular subscription must be paid, is fixed by and is in proportion to the average density of the population.
To illustrate this, take the city of New York as a starting point. It is the leading publication center in the country, and a larger number of publications entered as second-class matter are issued from the city of New York than from any other one city of the country.
The population of New York state in 1906 was estimated to be 8,226,990. The population of the state of New York alone is as large as that of the whole western half of the United States, and yet that whole western half of our territorial area contains only about one-tenth of the entire population of the country.
The average number of subscribers receiving regular publications through the mails as second-class matter in proportion to population is as large in the one state of New York as in the entire western half of the United States. So the Postoffice Department would serve in New York state, within an area of 48,204 square miles of closely settled territory, as many subscribers for second-class mail matter as it would be compelled to serve over a sparsely settled region in the west covering 1,513,394 square miles, that being the area of the western half of the United States, not including Hawaii and Alaska.
Second-Class Mail Matter
An average length of haul of second-class mail matter now carried by the national government would be much greater if limited to the one state of New York and the western half of the United States, than if applied to the entire country; for the very simple reason that the vast sparsely settled area in the west would comprise one-half of the total number of subscribers served; whereas if the whole United States were included, then the western half with its sparse population would embrace only one-tenth of the whole number served, and nine-tenths would be located in the more closely settled eastern half of the United States.
In other words, in averaging the length of haul of second-class matter, nine-tenths of the people served are in closely settled territory, where they are reached by the short haul, and only one-tenth in the thinly settled western half of the country, to be served by the long haul, and oftentimes by the most difficult and expensive methods of transportation.
Conditions That Control Are Reversed
The principle that controls the average in estimating the length of the haul of second-class matter is that as the proportion of density of population increases the average length of the haul is decreased.
It is naturally assumed that the same principle would control in fixing the average haul of transporting merchandise by mail if the movement for an extension of the domestic parcels post should prevail; but strange as it may seem at first thought, the exact contrary would happen. The principle that controls the average haul in the case of second-class matter would be reversed in the case of parcels post extension. The greater the distance the more remote the territory, the more sparse the population the larger would be the proportion of merchandise shipments by mail as compared with the whole volume of such shipments.
The reasons for this are, first, because the express companies with their flexible distance rate system would practically surrender the distant territory and make a rate on nearby points so much lower than the government rate that the short haul service would go to them, leaving the long haul shipments for the government; and, second, because it is the distant market that merchants and manufacturers desiring to trade by mail wish to reach by the parcels post system of delivery and which they would exploit if the opportunity were created.
Impossibility of Adjustment
Every effort of the national government to readjust an average flat rate so as to meet this condition, and command for the parcels post the desired proportion of nearby business, would simply be to get out of the frying pan into the fire. To lower the average flat rate so as to compete with express companies in nearby territory and on the short hauls would stimulate the volume of long distance shipments and still keep the balance on the wrong side of the ledger. To raise the average flat rate, so as to secure a larger revenue from the long distance shipments, would widen the circle within which the express companies would be able to command the business by a lower rate and reduce the government revenue by taking away from it more of the short haul business.
It has been urged that one reason why the proposed extension of the domestic parcels post should be adopted is that it would lower the express rates. If that should occur the rates would, of course, be lowered in the territory, where by lowering their rates the express companies could command still more of the short haul business, and thereby increase the proportion of long haul business that the government would have to carry at a loss. Every time the express companies lowered their rates it would increase the annual deficit that would be incurred by the government. No business proposition could be more simple. The government would be in the position of having entered into a competitive business. It would have done this after adopting at the start a system that made it impossible for it to cope with its competitors. Whatever flat rate the government established would be met by a lower distance rate by the express companies that would take the short haul business from which the government could earn a profit, leaving to the government the long haul business that it could only conduct at a loss. Nothing that the government could do would prevent this, because it would make the conditions worse one way or the other every time it either lowered or raised its flat rate. If the flat rate were lowered, the proportion of long haul business would be increased, and the losses be as great as ever. If the flat rate were raised the proportion of short haul business would decrease, and the average cost would still create a heavy deficit.
Act With Open Eyes
The fact is, the United States government cannot carry merchandise by parcels post without having to meet an enormous annual deficit for conducting the service, and the service should not be undertaken by the government unless such a deficit is to be deliberately and knowingly created and assumed by the people at large. The government is asked to undertake an impossibility, if it is expected to make the service pay for itself, when it is asked to adopt the proposed extensions of the domestic parcels post.
A flat rate system of charge cannot, in the very nature of things, be operated in this country without loss. The only way to avoid such loss would be the adoption of a distance tariff by the government, just as is charged by the express companies. The proponents of domestic parcels post extensions do not advocate such a distance tariff system and it will be time enough to consider its merits if it ever comes before the people for serious consideration. The fatal defect in the reasoning of the advocates of the proposed parcels post extensions is that they disregard the fact that we live in a country as broad as a continent and extending for over three thousand miles from ocean to ocean, and that in all that vast territory we have a population of only something over eighty million people.
A Subsidy to a Favored Class
Should the mail trade have a government subsidy?
That is a very plain and simple question, and the answer to it will also answer the question whether the shipment and delivery of merchandise by mail should be facilitated and undertaken by the government as advocated by the proponents of domestic parcels post extension.
If there is any good reason why the mail trade should be encouraged by government subsidy, it has never been set forth by any advocate of parcels post extension.
And yet, that is exactly what the proposition amounts to in its practical application. It would not be a subsidy that would create new business where there was none before. If it would do that it might be an argument in its favor. Instead of doing so, it would take the trade from the merchants, both wholesale and retail, who are now doing it, and transfer it to new and wholly different agencies, who would be enabled to secure the trade because of a direct advantage given to the new agencies by the national government at the expense of the general public.
Who Are the Favored Class?
Whether the seller or the consumer, under this system of a government subsidy for the mail trade, were to be regarded as the favored class, the result would be the same. A favored class would be benefited at the expense of the people at large, and without any advantage to the general public that would warrant it.
For many reasons the consumer in the long run would be injured more than benefited by the establishment of such a system for doing the business of the country, and ought for this reason to be eliminated in defining the favored class. Temporarily, and considering only immediate cheapness of needed merchandise, the consumer might imagine himself benefited, and probably would, but that benefit would be involved and submerged in far greater indirect losses in the future.
So the favored class, in the last analysis, would be the great catalogue concerns, and manufacturers who desire to eliminate the jobber and the retailer and country merchant and sell direct to the consumer, using the mail as the agency of transportation and delivery to the purchaser.
Without regard to any of the many serious objections to this system of trading, based on social and economic reasons, there is no possible ground upon which a subsidy for the encouragement of this mail trade should be given out of the United States Treasury and at the expense of the people at large.
Effect of a Subsidy
And when the effect of that subsidy would be to break down long established commercial customs, and divert the trade from institutions now successfully and satisfactorily conducting it, there is no more justification for such a mail trade subsidy than there would be for the government to carry some new brand of flour cheaper than the old established brands—in order to enable the manufacturer of the new brand to introduce and sell the product of his mills.
The growth of the mail trade, under its present limitations, has been stupendous, and multitudes of retail and country merchants have been injured, and many driven to the wall by it. But its future growth would sweep over the country with an irresistible force and wipe out of existence many thousands of now prosperous retail and general merchandise stores, if a subsidy were granted to the mail trade in the form of the proposed extensions of the parcels post.
There are many manufacturers who are doing business along the regularly established lines, selling goods to the jobber or the retailer, who are not now seeking or advocating any change in the channels of trade, but those manufacturers would change their system and enter the field of the mail trade if the advantages advocated by others were gained for it. If the avalanche of mail shipments that would follow the inauguration of such a mail trade system were ever once started no one could foresee the end or define the limits of the evils it would ultimately accomplish.