Part 2

*Journal of Political Economy. 16: 417-35. Jl. ’08. Shall the Scope of Governmental Functions Be Enlarged so as to Include the Express Business? Albert N. Merritt.

North American Review. 174: 807-19. Je. ’02. Defects and Abuses in Our Postal System. Henry A. Castle.

Parcels Post. pp. 812-4.

North American Review. 178: 222-34. F. ’04. Postal Service. E. F. Loud.

Parcels Post. pp. 224-6.

Outlook. 96: 794. D. 3, ’10. Parcels Post. George P. Engelhard.

_SELECTED ARTICLES ON THE PARCELS POST_

INTRODUCTION

The parcels post is not a new question. It has been the subject of popular discussion for years, and several of our postmasters-general have recommended an extension of our present system, sufficient, at least, to put it on an equal basis with our foreign service. Those who are familiar with the parcels post systems of other countries, and those who believe that the express companies should not be permitted to monopolize so large a part of the parcels-carrying trade, are in favor of these recommendations. On the other hand, those who believe that the government should not enter into any commercial undertaking, and those who fear that the change will be detrimental to the country communities and will result in the centralization of our population in the large cities, are strongly opposed to any increase in our present rates, or in the size of the package to be accepted.

There are several organizations who are actively engaged at the present time in supporting or opposing all attempts to enact parcels post legislation. The Postal Progress League, with headquarters at 125 East 23d St., New York City, has for its aim the improvement of our postal service, and is at present actively promoting the cause of the parcels post. This organization is made up of manufacturers, wholesalers, publishers and importers, and is supported by many of the state Granges. The Postal Express Federation is a new organization, formed for the express purpose of urging a reform of our parcels post service, and is supported by many of the same organizations which are back of the Postal Progress League. The American League of Associations (headquarters at Room 343, Rand-McNally Building, Chicago, Ill.), is composed of wholesalers in all lines of merchandise. Its object is to promote the welfare of the small towns and country communities, and to oppose the centralization of population in cities. It is at present actively engaged in fighting the parcels post.

These organizations as well as several others, named in the bibliography given elsewhere in this volume, publish and distribute literature for and against the parcels post, and the student of this subject will find it profitable to get into communication with them.

Hearings on the subject of a parcels post have been held before the House Committee on the Post-Office and Post Roads, at two different times, in April, 1910, and in June, 1911. At these hearings, have appeared representatives of the associations named in the preceding paragraph and of others who approve or oppose the recommendations for an enlarged parcels post. Among those who have appeared in favor of the parcels post are the various state Granges and farmer’s organizations, the American Dyers and Cleaners Association, the Manufacturing Perfumers Association, the Associated Retailers of St. Louis, the Pennsylvania State Federation of Labor, the Society of American Florists and Ornamental Horticulturists, and the National American Woman’s Suffrage Association. Other societies opposing the parcels post are the National Retail Hardware Association, the United Commercial Travelers, the National Association of Implement and Vehicle Dealers’ Associations, the National Associations of Retail Druggists and Grocers, and various Oil, Paint, and Varnish Clubs and Associations.

Postmaster-General George von L. Meyer recommended that our present parcels post system, which is now limited to parcels weighing four pounds or less, be extended to include all parcels of eleven pounds or less, and that the rate be reduced from sixteen to twelve cents a pound. He also recommended that a similar post be established on the rural routes for all parcels of eleven pounds or less, with a rate of five cents for the first pound and two cents for each additional pound. Various bills have been introduced into Congress embodying part or all of these suggestions. Other measures that have been presented provide that the government be given a complete monopoly of the parcels-carrying trade. One bill of this kind introduced by Representative David Lewis of Maryland, provides that the government shall take over the business of the express companies and have complete control of the carrying business in parcels under a given weight. This bill also provides that the zone-system of rates, now in operation in Germany, be adopted.

The General Discussion, following this Introduction, contains data in regard to our present parcels post systems both foreign and domestic, also similar data concerning the systems of other countries. It also contains information regarding many of the recommendations that have been made for an enlarged parcels post and the measures that have been presented to Congress. The student is advised to familiarize himself with the facts given in this discussion before proceeding to take up the arguments for and against the parcels post.

GENERAL DISCUSSION

Up to Members of Congress.

D. M. Carr.

Bills have been introduced in the present Congress, by Senators Burnham and Kean, with a view of further improving the postal service. These measures are for the purpose of enabling the postal department to extend its parcel delivery service, commonly designated as the “parcels post.”

There is a large percentage of citizens who strongly advocate an enlargement of the parcels carrying service performed by the government. A number of foreign countries have for years maintained parcels post systems on broad gauge plans; in fact, in Great Britain, in Germany and a few other countries, the parcels post is conducted in a manner so as to almost monopolize the express business. But in these countries conditions, both geographically and commercially, are vastly different from conditions that obtain within the United States. In the old countries, there is greater density of population, and distances which mail matter traverses are about one-thirteenth the distance that the average piece of mail matter is carried in the continental United States.

In considering any postal innovation, it is essential that not alone the operation and the revenue of the postal department be taken into consideration, but also what the effect of the innovation will be upon the industries located in various districts of the United States. Some of the bills introduced in Congress, chief among them, that introduced by Congressman Hearst during a former session, and the one by Congressman Henry of Connecticut, during the present session, have elements that mark them as undesirable and thoroughly impractical under prevailing conditions, or any possible conditions that may arise in the United States during the next quarter century.

The postal department is not conducted for the purpose of profit; rather it is conducted to perform a special service, which governmental function can best perform for the people. But the department should be self-sustaining. The revenue derived for the services rendered the people should be sufficient to cover all expense of operation economically performed. Any legislation involving the performance of this service for less than cost to the government does not appeal to the economist as wise or desirable. Yet the postal department does perform certain services at a loss, although there are compensating circumstances which more than overbalance the expenditure. In the carrying of newspapers and periodicals, under the present system, there is probably a loss, but at the same time the people receive a general benefit far outweighing the cost to the government by having cheap and good literature and such information as the press of the country conveys and this at the minimum of expense. The second class rate, a subsidy granted the press, has been instrumental to a degree impossible of estimation in improving the intelligence of the people and raising the standard of citizenship.

The proposals set forth in the Henry bill, involving the establishment of a parcels post system with a maximum weight of 11-pounds and the maximum charge for maximum weight 25 cents from one postoffice in the United States to any other postoffice or where mail is delivered, are objectionable from an economic view. In the first place, such service would entail heavy losses annually to the department; these losses possibly reaching $150,000,000 or $200,000,000 annually. Then again this system of parcels post would be a wonderful factor in increasing the unequal distribution of business throughout the nation. Geographical and other conditions greatly vary throughout the states of the United States. In the thickly populated districts, where manufacturing is carried on, the cost of labor and the cost of production of articles of manufacture, ranges from 20 to 50 per cent less than in other sections, principally in the agricultural regions. A parcels post that allows the transportation of merchandise at as low a rate as that provided for in the Henry bill, would enable consumers residing in agricultural districts, where wages are high, to purchase their goods in the lowest priced markets in the United States, and the results of this system would be to concentrate industries in the large cities and densely populated districts to the detriment of agricultural and other sections now undergoing commercial and manufacturing development. This would retard the growth of towns and the upbuilding of manufacturing industries in those sections. Thus it can be seen that there would be no compensating effects to justify the installation of a parcels post of this character.

The exorbitant charges made by the express companies and other carriers have caused the people of the United States to demand that the package carrying machinery of the United States postal department be enlarged. Recognizing this demand, Postmaster-General Meyer in his annual report made the recommendation that the parcels carrying service of the government be broadened and that the parcels post be extended so as to make the maximum weight of a package carried 11 pounds with a graduated rate up to one pound and a pound rate of 12 cents, making the maximum rate for the maximum weight $1.32. He also recommended that a parcels post be established over rural delivery routes, starting from the post-office where the route emanates and ending upon a rural route. For this service he recommended that the limit of weight be 11 pounds and the charge 5 cents for the first pound and 2 cents for each additional pound, making the maximum charge for an 11 pound package 25 cents, and that this service be limited to bonafide merchants and others residing along the line of a rural route.

In making his recommendation as to parcels post enlargement, it is evident that the postmaster-general well considered not alone the welfare of the department as to revenues sufficient for proper maintenance and the installation of a more efficient service, but as well carefully weighed the economic aspects as they relate to geographical and commercial conditions throughout the Union.

A careful study into Mr. Meyer’s plan will show that it does not contemplate any revolution in commercial methods. Notwithstanding the charges made to the contrary, by those opposed to his views, it does not appear that should his system be adopted by Congress that the large houses doing an exclusive mail order business would have any advantage over the merchants of the smaller cities and towns. The rural parcels post would certainly be not alone advantageous to the twelve or fifteen millions of people residing in agricultural districts, who are now served by more than 38,000 rural carriers, but would be of great value to the live merchants in the smaller towns who at a minimum of expense could utilize the rural service for the delivery of goods to their patrons in the country.

The bills introduced, respectively by Senators Burnham and Kean, are in perfect harmony with the recommendations of the postmaster-general.

With the diversion of small packages from the express companies to the mails, the revenues to the postoffice department would be proportionately greater than the increased cost occasioned by the greater tonnage of matter carried.

During the past fiscal year, the expense of maintaining the rural delivery routes was in excess of $26,000,000. The installation of a parcels delivery over the rural routes would most likely during the first year place the rural delivery on a self-sustaining basis. There are 38,253 rural routes. Should each carrier over a route on his daily trip carry only 88 pounds of merchandise from the local stores to the patrons on his route, it would give the government a revenue of approximately $24,000,000 annually, and this service can be performed without other carrying equipment than rural carriers now have.

When every phase of the recommendations of Postmaster-General Meyer be carefully weighed, it becomes apparent that his plans are based upon soundest business judgment.

Opposition to Mr. Meyer’s recommendations comes from three sources, namely:

Large manufacturers, jobbers and other classes of business men who annually spend enormous amounts for letter postage.

Country merchants who are unduly alarmed over the growth of the catalogue houses, and who fear that a parcels post extension will increase the mail order business to their detriment.

Express companies, whose revenues would be decreased by operation of the system.

Data Relative to Proposed Extension of Parcel Post. pp. 1-6.

OFFICE OF THE POSTMASTER-GENERAL,

_Washington, D. C., March 4, 1908._

MY DEAR SENATOR: It affords me great pleasure, in compliance with your request, to place at your disposal the data which are available relative to the proposed extension of the parcel post.

It does not appear to be generally appreciated that a comprehensive system of parcels post is already in satisfactory operation in most foreign countries. Exhibit No. 1 gives detailed information on this subject. I show here the limit of weight which has been fixed in a number of instances:

Pounds. Great Britain 11 Germany 110 France 22 Italy 11 Chile 11 New Zealand 11 Austria 110 Belgium 132 The Netherlands 11 Cuba 11

The rates in the countries mentioned are much lower than those shown in Exhibit No. 2, which have been recommended for the general parcel post in the United States.

The present rate on the general parcel post is 16 cents a pound for people in our own country, the limit of weight being 4 pounds, while the rate from the United States to 29 foreign countries is 12 cents a pound and the limit of weight to 24 of these countries is 11 pounds. In other words, our own people must pay 4 cents a pound more for the privilege of dispatching packages to each other than when destined to residents of a foreign country. I have therefore urged a rate of 12 cents a pound for packages forwarded through the mails to post-offices in the United States and its possessions, subject to the same regulations as exist at the present time, with the exception of increasing the weight limit to 11 pounds. The service can be rendered at a cost well within the rates recommended.

According to the report of the record of weight of second-class mail matter, transmitted by the Post-Office Department to the House of Representatives under date of February 1, 1907, the average haul of all second-class matter was 540 miles.

Of the total receipts of the Post-Office Department 69 per cent are expended for labor and supplies, and 7 per cent for conveyance charges other than those paid the railroads for transporting the mail. A general rate for parcel post of 12 cents a pound would produce a revenue of $240 a ton. Even on the basis of a 540-mile average haul, I find the debit and credit sides of 1 ton of parcel post to be as follows:

By postage $240.00 To railroad transportation, 540 miles, at 5½ cents $29.70 Other transportation charges 16.80 Labor and supplies 165.60 ------

Total cost 212.10 ------ Profit 27.90

A local parcel post confined to rural delivery routes is also advocated at the rates given in Exhibit No. 3. The Department favors the establishment of this special service because of its ability to render it with great advantage to the farmer, the country merchant, and other patrons of the routes, as the necessary machinery (over 38,000 routes now regularly covered by rural carriers) is in operation. There are some 15,000,000 people living on these routes, which shows the vast possibilities of the rural service. It has been estimated that if but three packages of the maximum weight were handled each trip on the rural routes now established the resulting revenue, even at the low rates given, would more than wipe out the postal deficit. The increased cancellations would automatically advance the salaries of postmasters of the fourth class, and the remaining revenue, which would be clear gain, would be of great assistance in making the rural service self-sustaining. The rural service will, in all probability, cost the government this year $34,000,000, an increase of $10,000,000 over last year.

The history and advantages of the rural delivery should be understood by our people. There is a feeling in many quarters that it is an extravagance and an unnecessary drain upon the postal revenues. The first rural route was established in the latter part of 1896, $14,840 being expended for rural delivery during that fiscal year. At that time the postal deficit was $11,411,779. During the fiscal year ended June 30, 1907, the expenditures for rural delivery aggregated $26,671,699, while the postal deficit showed a decrease, as compared with 1897, of $4,800,000, the deficit amounting to $6,653,282. This would seem to show that while the expense incurred for maintaining rural delivery is great, yet the rural delivery has been instrumental in increasing the general postal receipts. However, its benefits to our people can not be measured in dollars and cents.

That a local parcel post would be of material advantage to the retail merchant in competition with mail-order houses is seen at once when it is pointed out that the latter, at the proposed general parcel post rate of 12 cents a pound, would be obliged to pay $1.32 for sending an 11-pound package to a rural route patron, a difference in favor of the local storekeeper of about 10 cents a pound, or $1.07 on an 11-pound package.

Letters and petitions for the extension of the parcel post are being received from all sections of the country. Many commercial bodies formerly opposed to any action of this kind are on record as being heartily in favor of it.

On the other hand, objections have been raised to the measures the Department is advocating. Although no sound argument has been advanced in opposition, the contentions which have been made are not without interest. I mention the more important of them, at the same time giving the replies which they have elicited:

It has been stated that the Department is not equipped to deliver 11-pound parcels received in the general mails. The present postal regulations provide that where a package is of undue size or weight a formal notice shall be sent the addressee requesting him to call for it. This practice, would continue were the weight limit increased to 11 pounds, in the case of offices having free delivery. Nor would it work a hardship, for under the present limit of 4 pounds the average weight of parcels sent through the mails is but one-third of a pound. Increasing the weight limit would not have nearly as great an effect on the average weight of parcels mailed as seems to be commonly supposed. Where packages were addressed to persons living on rural routes they would, of course, be delivered to the boxes of the patrons by rural carriers, who would not thereby be inconvenienced.

The claim that the special local rate recommended for the parcel post on rural routes would eventually be extended to include the entire postal service has been given considerable publicity. The impossibility of this becomes apparent when attention is directed to the cost of railroad transportation, which has no part in the former service. About $45,000,000 were paid last year for mail transportation and $6,000,000 for postal cars.

Others have said that large mail-order houses would, under the proposed law, utilize the special parcel post or rural routes through agents to the great disadvantage of the country merchant, first assembling their orders and despatching them by express or freight to suitable distributing points. The Department has recommended provisions which will prevent any such use of the routes. It should be remembered, too, that even in the absence of a specific prohibition of this nature, any systematic attempt upon the part of a mail-order house to thus distribute its wares would necessitate the employment of many thousands of local representatives. The catalogues of these concerns indicate in no uncertain way that they attribute their success, in large measure, to their low selling expense, and that the absence of any sort of agents is the principal feature of their argument in accounting for the supposedly low prices of their goods.

The cry of “class legislation” has been raised. There is, of course, no discrimination involved, for all who can be reached by rural carriers will be accommodated. It would be as reasonable to decry the laws which permit the delivery of mail to patrons living on rural routes, while persons differently situated are obliged to make a trip to a near-by post-office to obtain their letters.

Those who claim that an increase in the weight limit would work an injury to country merchants appear to have the impression that mail-order houses now deliver their goods extensively through the postal service, and that this practice would largely increase if the recommendations which have been made become law. Upon a moment’s reflection it will be perceived that the present rate of 16 cents a pound ($16 per hundred-weight), as well as the proposed rate of 12 cents a pound ($12 per hundred-weight), are alike prohibitive on practically all lines of merchandise. Mail-order houses make their shipments usually by freight or express and would continue to do so.