How Do Small Businesses Play Santa?
Nobody has a better product delivery system than Santa Claus. Unfortunately, though, Santa’s not about to write a ‘How To’ book for the rest of us to follow. Besides, in order to get gifts to all good little girls and boys around the world in one night requires a motivated team of elves, reindeer that can fly, a special sled, and apparently other supernatural or time traveling abilities.
So what do the rest of us do? How do, for example, so many small businesses get their goods shipped to consumers during the holiday crush?
Well, the U.S. Postal Service will process two to three times the normal number of letters and packages during the holiday season. During the peak holiday period, Federal Express experiences a 40 percent jump in daily package delivery. UPS reports that between Thanksgiving and Christmas, it will deliver 300 million packages.
Thank goodness for competition. I don’t know about you, but if I want to make sure something I purchase arrives in time for Christmas – especially the closer to the 25th it may be -- I look to private services, like UPS or FedEx, to do the delivery job rather than the Postal Service. Like many other consumers and business owners, I’ve just experienced too many screw-ups by the Post Office over the years, while customer service from private deliverers has been far superior.
There are other problems with the Postal Service. Costs have risen quite dramatically relative to inflation over the past three decades, and are projected to keep rising. Questions persist about monopoly profits in areas like first-class mail being used to cross subsidize areas where the Postal Service competes with private firms.
Fortunately, there is some interest from policymakers. President George W. Bush appointed the Commission on the United States Postal Service, which offered reform ideas in late July. Leaders of the Government Reform Committee in the U.S. House of Representatives issued a bipartisan statement on December 8 regarding the need for postal reform. They noted that “the Postal Service continues to be hampered by flagging revenue, high costs, and an untenable debt load. This crisis has been brewing for years, and it’s time to act on comprehensive reform. Too many jobs, too many businesses and too many families are depending on us.”
Perhaps no other group sees the need for dramatic postal reform than small businesses. The President’s commission made the point: “As individual households rely more and more on the Internet for a wider array of their communications, the nation’s Postal Service — by default — is becoming primarily a medium for the transmission of business correspondence. All tallied, bill presentment and payment, commercial correspondence and advertising combine to generate 93% of total U.S. First-Class Mail volume today.” That means that it’s the business community – primarily small businesses – that picks up the tab, one way or another, for inefficiencies at the Postal Service.
What can and should be done? The President’s commission correctly emphasized that “fiscal stabilization must come from reduced costs through the modernization of every element of its operations, service delivery and asset management,” while focusing on “its core value to the nation – delivering the mail – and recognizing that, as demand for that service contracts, perhaps the Postal Service should contract, as well.” This stands in stark contrast to the Postal Service’s stated desire to expand into other markets, which only would result in mounting losses and growing subsidies from ratepayers (i.e., mainly small businesses) or taxpayers in general.
The commission also wisely pointed to private-sector options. The report states: “Where private-sector companies can perform aspects of the nation’s postal service better and at less cost, the Postal Service best serves the nation by involving them in the provision of universal postal service.”
Unfortunately, though, the commission rejected full-scale privatization. But if serious about controlling costs and improving service over the long haul, privatizing the Postal Service stands as the only reliable option in the end. Substantive cost controls, lower prices, and improved service only come with the incentives provided by private ownership, market competition, and price and profit signals in the marketplace.
While many questions remain unanswered about how Santa Claus accomplishes everything he does, I have no doubt about one thing: Santa’s Workshop and his global distribution system are not government operations. Santa is not a bureaucrat; he’s an entrepreneur. No wonder he performs such magic.
Raymond J. Keating serves as chief economist for the Small Business Survival Committee.
