Explanation
Not too long ago, everything was reliant on email. The household bill arrived in an envelope with few windows in front. Love letters were the main means of romantic connections. And Christmas cards were as ubiquitous as icicles in winter.
But today, the spread of emails, texts and online billing has taken away mail from its economic and social significance letters, leaving the post office in the midst of bankruptcy. Unless that business model changes dramatically, taxpayers will bail out the Canada Post forever.
“The first thing you need to understand about Canada’s postal services is that the volume of letter mail has fallen by 65% since 2006,” says Ianley, a business professor at Carlton University’s Splot School. “And this trend won’t change.”
In 2006, Canada Post delivered 5.5 billion mail, earning $148 million. Last year it delivered 2.3 billion mail and lost $748 million. Within a decade, Lee predicts that “letters are essentially gone, along with the core business of Canada Post.”
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Lee will support a “major surgery” at the Canadian Post Office, cutting its staffing and preventing it from becoming a permanent ward for the province. This includes eliminating all door-to-door postal delivery, terminating five-day service, closing all standalone post offices, and replacing them with grocery and pharmacy franchise outlets.
This kind of reform is already happening all over the world. For example, last year, Australian mail switched all customers to alternative-day delivery, while Finland moved to three-day delivery. But even with significant service cuts, Lee would require some government support to help Canada Post maintain its mail delivery in rural areas.
If the goal of postal reform is to completely remove the burden of Canadian mail from the shoulders of taxpayers, then reducing service requirements and labor is not enough. The only way to guarantee the future without a forever public postal deficit is to remove it completely. It’s about selling it to the private sector.
Vincent Geloso is a professor of economics at George Mason University in Virginia and a senior economist at the Market-Based Montreal Institute of Economics. “There’s no particular reason why the government should be in charge of mail delivery,” says Geroso. “The Canada Post has always been a political figure that we take from taxpayers.”
Geloso advocates ending Canada Post’s monopoly on mail delivery by allowing private companies to compete on their chosen terms. Following this, he sells Canada Post to eliminate unlimited liability for taxpayers. “Private competition in the postal service is very easy to achieve,” he argues. “You just need to look around the world.” Regarding evidence regarding the benefits of privatization, he points to the long track record of European privately owned post offices.
In 2013, the European Union liberalised the entire postal sector. The best example of this process is the German post, which is extremely profitable and highly efficient. Last year, we booked a net profit of 3.7 billion euros ($5.5 billion). Canada Post has never had that year.
Other notable European postal privatizations include Sweden, Belgium, the Netherlands and Austria. Italy only partially privatized its postal service, but is now considering selling the rest to pay off government debt.
Regarding the overall European experience, Matteus Chodecki, a postal reform expert at the Digital Association Centre of the European University Institute in Florence, Italy, states that after more than a decade of postal liberalization, “it has no effect on most Europeans and nothing has changed.” Except, of course, that losses are the liability of the shareholders and not the taxpayer.
With the privatization of mail proven its value in Europe and gaining steam in the US, Gueroso suggests that Canada’s biggest obstacle will overcome the obstructive mail coalition. To resolve this issue, he recommends offering first rounds of stock exclusively for members. This not only makes you a concept partner, but also turns Canada Post into a much more efficient company.
“All of a sudden there’s an incentive (for union workers) to improve productivity and profitability,” Geloso says. “Now they have no motivation to profit.”
Unless critical steps are taken promptly, post-Canadian posts risk a permanent burden on taxpayers, sucking up valuable resources while providing services that Canadians provide or are ready to pay. Given your experience in Europe, the surest path to success is to take over the market. It’s time to sell Canada Post. The check is not included in the email.
The views expressed in this article are the views of the authors and do not necessarily reflect those of the epoch era.
