Part 11

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.

Independent. 70: 72-3. January 12, 1911.

Objections to the Parcels Post. Allan W. Clark.

There are probably a hundred really national organizations of dealers, and several thousand state and local organizations--generally affiliated with some of these national bodies. These embrace practically every line of retail merchandising and the ramifications of various interests among them. The individual, due paying membership in some of these larger organizations, like the National Association of Retail Grocers, the National Retail Hardware Association and the National Association of Retail Druggists, is from 50,000 to more than 100,000 each. I have never heard of any association of retail dealers that is not on record against the extension of the domestic parcels post in any form, especially the R. F. D. “entering wedge,” except the organized department stores in one or two cities (such as “The Merchants’ Association of New York”), who want this practical government subsidy for the benefit of their mail order departments and for cheaper local and suburban delivery.

I have mentioned only retailers’ organizations, whose resolutions on this subject, during the convention season, crowd the pages of all the trade journals. Nevertheless, practically all the organizations of wholesalers and manufacturers, besides many local commercial and civic associations, are opposed to the parcels post, and like the retailers, have been fighting it for years. Conspicuous among these is the Chicago Chamber of Commerce, the leading members of which, thru the “American League of Associations,” are pushing a national campaign “to assist the retail merchant and to co-operate with other associations in the protection and development of home trade, and (the italic emphasis is theirs), _specifically, this organization is now opposing the proposed parcels post legislation_.”

These dealers, jobbers, manufacturers and others interested in the maintenance and the improvement of the local stores and the local community, and who oppose any extension of the domestic parcels post, vie with its advocates in denunciation of the extortionate charges of the express companies. But they go further--their associations are fighting in many states to secure state regulation of express rates and classification; and they are making practical progress, with every prospect that their appeals for national regulation will be recognized by the Interstate Commerce Commission, which has just won its fight to regulate sleeping car charges. The opponents of parcels post want lower and equitable rates for the transportation of small packages of merchandise, but they believe that these rates, like those on the transportation of larger packages, should be investigated and regulated by the Interstate Commerce Commission, especially as various state railway boards have recently demonstrated the fact that the express companies are chiefly owned by the railroads and are merely vehicles to bring into the coffers of the railroads larger profits than can be secured thru government regulated freight rates.

That any one can find an example for the United States in the parcels post systems over government owned railways in European countries, the largest of which is smaller than Texas, is incomprehensible to the average business man who is not asking for a government subsidy to arbitrarily annihilate distance and the natural local advantages of thousands of local business communities in order to increase the present $200,000,000 mail order business; and this in a nation that maintains a high tariff wall that may or may not “protect” the American manufacturer, farmer and workman, but the chief effect of which, so far as the distributor, the dealer, is concerned is to place him between the upper and nether millstones--the butt of criticism, the subject of Congressional inquiry on the high cost of living!

The mail order houses want a general parcels post; the general business community is opposed to it. Suppose that both are actuated by selfish reasons, one to gain an arbitrary advantage and the other to prevent it--where do the people come in, those besides the mail order men and the million retailers and their families?

Further Thoughts on Parcels Post pp. 3-5.

Charles W. Burrows.

Postmaster-General Meyer in an address to the New England Postmasters’ Association, Boston, October, 1907, and elsewhere, made recommendations urging legislation giving to the Postal Department a greatly extended parcels carrying service. The recommendations made were mainly two.

First. That the present rate of sixteen cents per pound for the mail carriage of merchandise with a weight limit of four pounds per parcel as the maximum shall be changed, reducing the rate to twelve cents per pound (with fractions at rates from one cent up) and increasing the weight limit to eleven pounds. The recommendation was that this should be, like the letter charge, a flat rate to prevail anywhere within the United States and its possessions irrespective of distance or accessibility.

In support of this, his first proposition, he calls attention to certain inconsistencies now existing in the service. He states that an individual entering any post office in the country with a parcel weighing four pounds, addressed to New York city will be obliged to pay sixty-four cents for its carriage by post. If on the other hand it is to pass through New York city to any one of the thirty-three foreign countries with which we have postal conventions, the charge will be but forty-eight cents. Further, should the package weigh more than four pounds, it will be denied admission to the mails in this country while it will be accepted and forwarded to any of these foreign lands if it weighs up to four pounds six ounces, and in the case of some, twenty-four of the countries it will be accepted even if it weighs so much as eleven pounds, and it is on account of these inconsistencies that he urges his legislation.

Let us first examine this point. General Meyer is quite correct in his statement that it does cost more to send, for example, a pair of shoes weighing just four pounds from Brockton, Massachusetts, to New York city, than it would cost to send the same pair of shoes through New York city to any one of the thirty-three foreign countries with which we have postal conventions.

General Meyer, however, fails to state that while there is this large number of foreign countries with which we have postal conventions, yet not a single one of the twenty-four countries with which we have an eleven-pound convention is on the map of Europe. They are all of the nature of Jamaica, the Windward Isles, Venezuela, Barbados, Costa Rica, Danish West Indies, etc., countries with which we do not do any great volume of business.

It may further be stated that the weight limit with the remaining nine countries, most of which are European, is in reality intended to be the nearest approximation to our own domestic four-pound limit, that is, it is two kilograms--about four pounds six ounces--and the European countries all closely scrutinize this weight limit as the business is one that involves a loss in its operation. Germany, for example, for a number of years recognized an eleven-pound limit but changed to the two kilograms about three years ago.

It should be borne in mind, moreover, that the exchange of parcels between these countries and our own is made as a matter of comity or international courtesy, and is permitted because the amount involved is small. The work is done, too, in connection with the carriage of first-class mail which produces a large profit.

To illustrate this matter, Great Britain carried in her parcels post last year 104,819,000 parcels. Of these only 2,575,000 (less than 2½ per cent) went out of the country to all foreign countries, her own colonial dependencies included, and to the United States she sent only 61,000 and we sent to her 89,000 only. The difference which is after all what we make or lose upon, was some 28,000, and that was but a fraction of a tenth of 1 per cent of the whole business. With some of the other countries in question, we exchanged less than 1,000 parcels in the last fiscal year, and with one of them it was less than 100, while with all of them aggregated it was a total of but 330,000 parcels dispatched and 181,000 received; so when we examine this question of inconsistencies microscopically we find that it is truly of microscopic proportion only, and may be disregarded as having no important bearing upon the general question.

One Cent Letter Postage, Second Class Mail Rates, and Parcels Post. pp. 14-22.

Charles W. Burrows.

Paternalistic, socialistic legislation does not diminish the expense account, but simply transfers it from one person’s shoulders to those of others. It is with a people as with a person. If a father gives to his boy a pair of shoes, the shoes cost the lad nothing, they are to him as if they had descended from the skies, but the cost is a charge upon the father, unless he stole them, and even if acquired dishonestly the cost has simply been moved back upon the shoulders of the merchant. The compensation for the labor of producing the pair of shoes and of transporting them to the place where they are put to service is just as much a charge upon the community whether one individual pays for them or another. Similarly if the users of any governmental service do not pay a high enough tariff for that service somebody else must foot the bill.

Now to endeavor to demonstrate that whether the rates imposed for such service be high or low the government will inevitably be a loser and in large amount. To this end let us examine for a moment the parcels post systems of foreign countries.

In Germany a zone system prevails, but the tariff is always low. In England, a flat rate prevails, and this also is extremely moderate. And low rates prevail in other foreign countries.

But circumstances alter cases, and with other things we should bear in mind that the total area of Germany is but 208,000 square miles, while the area of the one state of Texas is 265,000; in other words, Germany is but four-fifths the size of Texas. The area of France is almost exactly that of Germany, again but four-fifths the size of Texas. The area of England is 50,000 square miles, less than one-fifth the size of Texas. We have 26 states, any of which is larger than England, and several many times larger. The area of Switzerland is just under 16,000 square miles, and you can put nearly seventeen Switzerlands into the one state of Texas. The area of Belgium is but 11,000 square miles; you can put 24 of it in the state of Texas. Again the density of population in England is over 550 to the square mile; that of Belgium, more than 600 to the square mile; of Germany nearly 300 to the square mile.

Moreover, no haul in England can be long and but few hauls in the United States would be short. You may perhaps be able to take 550 parcels from a central originating point like London, carry them for an average haul of 41 miles, which is the case in that country, and deliver them all within one square mile of territory at a small tariff per parcel without material loss, though even England is losing money upon this service with all conditions favoring.

But remember that the density of population of the United States by the last census was under 25 to the square mile, and that the parcels post service would not be mainly operative in densely populated Rhode Island and near the large cities like Boston, New York, Philadelphia, etc. If we imagine that 550 parcels are sent from New York city over a long haul of more than 1,500 miles to the state of Wyoming, where the density of population is one to the square mile, and have to be distributed to 550 distinct individuals resident in 550 separate square miles of territory, no sane business man can doubt that at any tariff likely to be imposed the government would be a heavy loser.

According to one expert’s estimate, it is possible to carry the second-class mail matter for short distances on dense traffic routes, and in quantity lots to one address, that of a news dealer, for example, as is done for the average daily paper for the part of its circulation that goes by mail, up to 45 miles with little loss even at this low 1c a pound rate, though first-class mail at the rate paid by it can be transported nearly 5,000 miles before the service shows a loss, and post cards over 11,000 miles.

Now let us suppose a parcels post statute to be enacted, and that the rate be put at anything you please from 5c per pound to 10c per pound. Even at the low rate of 5c per pound the express companies will do the nearby business. If the rate be 10c per pound, the government will have less to do, but it will still have much with the weight limit considerably increased over the present amount. And if the rate be put at 12c per pound, still the government will not make money, not on a single parcel that it carries. All service that can be rendered at a cost of less than the government charge will be handled by the express companies.

We cannot have as does Germany a zone system. But without the operation of a zone system, or a monopoly as on first-class matter, the government will get all of the losing business and none of the remunerative.

A friend of mine made a visit a few years ago to the state of Washington. First he took from Cleveland a 2,000 miles railroad ride. He then had a day and a half steamboat ride up the Columbia river, following that a two days’ stagecoach ride to the remote locality that he was visiting.

He remarked to me in connection with this trip that he should like to see the government handle a parcels post service for that country at a profit, even at a rate of 25c a pound, and added that every pound of anything that went in there would most assuredly be handled by the government were a parcels post service in operation, for it would be the cheapest method of getting things there.

Now, the only reason we can have a flat rate upon first-class mail is because the government makes that a monopoly, and you can send your letters in no other way than through the post office. Hundreds of millions of profitable short haul letters carried between the largest cities of the country where traffic is very dense take care of the proportionately small number of expensive long hauls.