Part 25

Merchants' and manufacturers' samples are not, of course, strictly speaking, of the nature of correspondence, and their conveyance by post represents in some aspects an expansion of function. The main function of the Post Office is the distribution of letters, or, as it may be expressed generally, the distribution of any species of communication between persons, reduced to material form, whether as manuscript letters, postcards or circular letters, printed or written, or even in the form of newspapers. For samples of merchandise some relationship to ordinary communications may perhaps be claimed. They are themselves often the necessary complement of letters of business and are forwarded in order to convey a precise notion of the commodities with which the business is concerned, a purpose served much more effectively by the small sample than by the descriptive letter, which would be the only alternative. So far, then, as the Post Office is intended to assist the transmission of information of whatever sort, the carriage of merchants' samples is perhaps a legitimate part of its function, especially as the encouragement of trade is no small part of its main function. The transmission of small packets not inconvenient to handle and transport, although essentially different in make-up from letters, was therefore a natural development when advantage to commerce would result.

The impracticability of charging the ordinary letter rate, since such a charge would have been prohibitory, which has influenced the newspaper rate, is equally applicable to samples. The case for a lower rate was strengthened by the consideration that commerce would benefit, and the general considerations of the justice of a lower weight-rate for moderately heavy packets and for packets of less intrinsic value, applied to sample packets, no less than to newspapers, although this point of view was not perhaps consciously adopted. Based on these considerations, a special rate was given to samples, fixed more or less arbitrarily, and without examination into the question of what rate would be the lowest profitable rate for the business.

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The basis of the book rate is only to a slight degree economic, that is to say, related to the cost of providing the service. The justification for a low rate rests for the most part on the same considerations as the privileged rate for newspapers: the desirability of assisting the education of the people and the utility of books for the purpose, the comparatively low intrinsic value, and the impossibility of charging the scale of rates applied to letters--even less possible in the case of books than in the case of newspapers.

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The exceptionally low rate for printed matter for the blind has been given as a measure of philanthropy. By its means, although at some loss to postal revenue, the effect of the disadvantage of bulk and weight in such printed matter, which results from the affliction, is in a large degree removed.[642]

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The question of the rate to be applied to parcels is one of considerable difficulty. While considerations of public utility would probably make it undesirable for the State to derive a profit from the business, they would hardly extend to the point of conducting a large transportation business at a loss, and the results in England and Germany show how important and difficult is the problem of fixing remunerative rates. The rates for newspapers, samples, ordinary printed matter, etc., have been accorded not solely with reference to the cost of the service, but on grounds more or less political and social as regards the fact of granting a privileged rate, and more or less empirical as regards the fixing of the actual amount of the charge. For the most part this method has answered sufficiently well, the reason being that the cost per packet is comparatively small, and the privileged traffic has not generally assumed large proportions relative to the letter traffic. These empirical methods cannot, however, be applied in the case of parcels. The expense of the service performed by the Post Office is not, as with a letter, actually small, and confined to that of collection at one end and delivery at the other end of the journey, with a negligible cost (per packet) for transmission between the points of origin and destination. Cost of transportation itself becomes an appreciable item in respect of every parcel. For this transportation the Post Office is in the main dependent on the railways, and in the determination of its cost the principles determining ordinary railway rates must necessarily apply.

Those principles are complex and to a large degree indeterminate. On the problem of railway and other transport rates many volumes have been written, and many more will yet be written before a solution is arrived at.[643] Railways, like the Post Office, are unable to allocate the actual working costs with any degree of precision between the various kinds of service they perform. Like the Post Office, they have one general set of expenses, although they have diverse sources of revenue.[644] Even if the cost of service could in each case be definitely ascertained, its adoption as the sole basis of the rates would prove unsatisfactory.[645] For the most part the principles on which the rates are actually fixed resolve themselves into a consideration of "what the traffic will bear," that is to say, the test by actual observation and computation, strengthened, if need be, by actual experiment, of the rates which will yield the maximum advantage to the railway company.

The advantage to the railway conducted under private management may be defined to be the excess of receipts from the traffic over the out-of-pocket expenses actually incurred in handling the traffic. To obtain this maximum it has been found necessary to vary the charge according to the nature of the goods. Elaborate, detailed classifications of goods have been arranged with distinct scales of rates for each class, devised on the basis of charging each kind of goods with the rate likely to yield to the railway the maximum of advantage as defined above.[646] Although somewhat crude and a little empirical, certainly largely arbitrary, this method has been almost universally adopted for the determination of railway charges.[647]

A characteristic feature of such charges is that account is invariably taken of the distance over which the goods are transported. In contrast with this, the principle of uniformity of rate irrespective of distance has been universally adopted in regard to all postal packets other than parcels, and to some extent for parcels. The application of the principle to parcels rests, however, on other grounds than its application to letters. Sir Rowland Hill himself never contemplated that the principle was necessarily applicable to all matter which might be sent by post.[648] The circumstances under which he made his discovery, and the facts on which he relied, make it plain that, in the absence of other overpowering considerations, the grounds advanced in the case of light letters will not justify uniformity of rate irrespective of distance for packets of considerable weight, which necessarily involve appreciable cost for transportation. From the financial point of view, the uniform rate is, moreover, inapplicable to any class of traffic not secured to the Post Office by monopoly, since private undertakings will always step in and take away the profitable sections.

For heavy parcels a uniform rate cannot be justified. There are, however, certain considerations not purely economic which may be held to justify a uniform rate for small parcels, especially if it be held that the State may conduct such a business for the advantage of the public, and abandon to some extent ordinary commercial balancing of cost and revenue.

Simplicity, afforded in a high degree by the uniform rate, facilitates the administration and practical conduct of Post Office business, and is, therefore, desirable, even if a little unjust. Complicated rates are an unfailing source of irritation to the public as well as a source of embarrassment to the staff, and there is not much doubt that one feature of the parcel post which commends it to the public favour is the simplicity of its rates.[649] There is, moreover, to be considered the view that it is no part of the duty of the Post Office to provide services in towns or districts for which private industry gives adequate services, but rather to cover the whole country, so that the public may always have ready to hand a means of forwarding small packages of goods to friends or relatives, or traders to customers, in other parts of the country. Such a service has many features which distinguish it from business undertakings of the ordinary type. In this way uniform rates may prove justified; since if in regard to any local service, or the service between any two points, the uniform rate, which must necessarily in certain cases yield considerable profit, is found burdensome, it is in all such cases open to private industry to provide the remedy. In the case of light parcels the cost of the services of collection and delivery is much greater than that of conveyance; and the variation of the total cost with distance of transmission is small proportionately. The uniform rate can therefore be fixed near the level of the cost. But even for such parcels it is economically unsound. It cannot be fixed at a really low level, because it is to be applicable to a parcel sent across the whole territory of a postal administration; and with such a parcel, even if weighing only 1 pound, the cost of transportation is an appreciable item.

The uniform rate for parcels is an expedient for smooth working rather than a scientific rate, and against the acceptance of uniformity of rate as a principle must be placed the fact that railway companies have not adopted it. The actual results of the uniform rate have not been altogether satisfactory. The small use of the post for the transmission of the heavier parcels appears to indicate that the rate for such parcels is, in general, too high.[650] For local traffic in small towns, where cost of conveyance is negligible, it is almost prohibitive,[651] and is much higher than the rates charged by competing agencies.

The considerations in favour of a degressive rate apply with greater force to parcels of moderate weight than to the comparatively light packets which pass at the letter rate, and this feature should receive fuller recognition in the determination of parcel rates than has hitherto been the case.

To sum up: there are important differences between the letter and parcel traffic: (1) the letter traffic is a monopoly in which the more profitable business belongs to the State as well as the unprofitable, while the parcel business is not a monopoly, and any traffic which proves profitable may at once attract private competition; (2) in the letter traffic the cost of transmission for a given distance is negligible, and in the parcel traffic it is important; (3) the social arguments which make it desirable for the State to secure as wide as possible a diffusion of letters containing information, of newspapers, books, and samples, do not apply in the same way, or to the same degree, to the traffic in parcels containing goods.

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In essentials the case of international rates differs little from that of inland rates. The work in connection with a letter falls into three main divisions: (1) at the place of posting; (2) transmission from place of posting to place of delivery; and (3) at the place of delivery. In the case of inland letters, the first and third factors preponderate to such a degree that their cost alone need be taken into consideration in fixing the rate. The factor of transmission can be ignored. In the case of letters from one country to another, the services at the offices of posting and delivery are performed under different, instead of under the same, administrations, but for all practical purposes are otherwise unaffected. The only factor seriously affected is that of transportation.

The variation in the cost for transportation[652] depends largely on distance, and in that respect various countries are affected in varying degrees, not only as regards the actual distances over which their letters for or from places abroad are sent, but in the way in which those distances compare with the distances over which letters in the inland service are conveyed; and the question therefore wears a different aspect in the different countries. Thus a very large proportion of letters in the British service are forwarded over greater distances than letters in the inland service. The same thing is probably true of France and Germany. Distances in the inland services of the United States and Canada are, however, comparable with the distances in the international services in Europe, and in many cases with distances in their own international services. If, therefore, mere distance of transmission were the only consideration, there would obviously be little to urge against the application of the ordinary penny letter rate for inland transmission, at least to the traffic of the whole of Europe, just as it has been applied to the traffic of the whole of the United States and Canada.[653]

But it is doubtful whether inland distances are really comparable with international distances. The cost of maintaining lines of communication between distant countries is often altogether out of proportion to the quantity of mails conveyed; and the sums paid, although ostensibly payments for the conveyance of mails, are often really subsidies, paid sometimes in order to assist the shipping or other industry, sometimes for political purposes.[654] They cannot, therefore, be used as a basis for calculating the amount of postage which should be charged on private letters.

This was particularly the case in earlier times.[655] With the expansion of commerce and the establishment for commercial purposes of regular lines of steamers between the principal countries of the world, the task of the Post Office has been much simplified, and, notwithstanding the growth of mails, the cost actually reduced.[656] It is, however, still heavy, and in some cases the payments include an element of subsidy. The cost of transmission by sea of a foreign letter in the British service is on the average 1/4d. Foreign rates are not, however, fixed on a simple cost basis. The reduction to a penny of the letter rate between Great Britain and all parts of the British Empire; between Great Britain, Egypt, and the United States; and between the United States and Germany and France, has been made from considerations of general advantage, political or otherwise, rather than from considerations of immediate profit or loss on the postal service.

The international parcel post has always been regarded as primarily commercial,[657] and the service has been deliberately restricted to small parcels on the ground that the conduct of an ordinary transportation undertaking is not a postal function, and that the admission of heavy parcels would render impossible the maintenance of the postal principle of uniformity of rate. Parcel mails are in the international service frequently denied the privilege of rapid transmission accorded to letter mails.[658] The developments of the present war have emphasized the essential distinction to be drawn between communications on the one hand, and packages of goods sent by parcel post on the other.

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The general basis of postal rates is naturally affected in some degree by the fact that the Post Office is a State undertaking, and the propriety of Government control deserves consideration. Adam Smith, with his individualistic leaning, was bound to touch on the question of a State Post Office. He thought there was no objection to the conduct of the Post Office by the Government,[659] and economists since his day have generally followed his view.[660] This acceptance of State control as theoretically justifiable has probably been induced by the logic of facts rather than by the recognition of any peculiar characteristics tending to that view discoverable in the postal service as an industrial organization.[661]

The transmission and delivery of letters for private individuals may have some affinity to the transmission of official despatches, but in theory such affinity is slight, especially in regard to the transmission and delivery of local letters. Because the Government had found it essential for its own purposes to establish a system of posts, it did not necessarily follow that the Government must assume also the function of conveying letters for private individuals. But the Post Office is one of those organizations in the case of which the normal influence of economic forces tends to exclude competition. Its operations are spread over large areas, and duplication of services over large areas would result in waste of effort and increase of expenses. Competing postal establishments would exhibit the same glaring economic waste as competing arrangements for the supply of gas, water, or electricity. The service thus almost certainly becomes a monopoly; and its nature makes the assumption of its management by the State advantageous. In times of war, State monopoly of the means of communication (postal, telegraph, telephone, and wireless) is essential. Even if these services were in private hands at the outbreak of war, the first action of the Government would undoubtedly be to assume control.

A further reason justifying the conduct of the postal service by the Government rather than by private enterprise is that it is a necessity for the State to provide a means for the regular transmission of intelligence by letter of script throughout its territory. If the working of the service were left to private enterprise, it would be certainly confined to such routes as were found profitable, and those parts of the country in which profitable routes could not be established would be left unserved. The State alone can secure the establishment of a complete service, in which regard must not be confined to considerations of mere profit.[662] There are also minor features which render State management peculiarly applicable to the postal service. The actual operations are simple. As Adam Smith said: "There is no mystery in the business."[663] The work is for the most part of a routine character, and calls for no special skill or knowledge. That is not to say that in the performance of the actual duties there is no room for the acquirement of considerable manipulative skill. It means that in principle the chief operations are simple, and may be reduced to routine processes. There is the further important consideration that the operations of the Post Office are intimately connected with the daily life of the people, and are constantly subject to public observation and criticism.

Assuming a State parcel service, there is to be considered the question whether that service should be attached to the letter post or whether it would be more economical to set up a separate service. It might appear at first sight that this question has been determined by the practice. But as the financial scheme of the letter post rests on the fact that the actual transportation of the letters occupies, as regards expense, a quite subsidiary place,[664] it is difficult to discover any special relation between the letter post and a business which is really part of the general transport industry. It may in some instances be advantageous to utilize for parcels the service provided for the transmission and delivery of letters. An organization reaching to all parts of the country is ready to hand, and one which, in rural districts especially, is often not employed to its full capacity. It may therefore in some cases manifestly be economical to give additional work to the service; but, at the same time, the provision of a service for parcels may in other cases add unduly to the cost of the general service--as, for example, when it becomes necessary to make special arrangements on account of occasional variations in the numbers of parcels.[665]

In any case, a postal service should be limited to parcels of moderate size and weight, because the Post Office, as at present organized, is for the most part adapted to the handling of packets which can be delivered by foot-messengers. In rural districts this is almost universally the rule.[666] It is frequently necessary in the towns to separate entirely the parcel post traffic from the ordinary light letter post traffic (except in those parts of the service where the parcel post traffic is very restricted), to provide a separate staff, and to furnish different equipment.[667] In effect, two establishments are maintained. A separate parcel staff could, of course, collect and deliver traffic of any dimensions or character. But difficulties would arise in regard to the transportation from town to town of heavy parcels,[668] and in rural districts their distribution could not be undertaken without a reorganization of the general arrangements of the mail service. Any sort of regular house-to-house delivery would be enormously expensive. To a large extent--in the United Kingdom at any rate--such a service would be a duplication of services already provided by railway companies, and consequently economically wasteful.

The transportation of parcels is, indeed, in many aspects a service more appropriate to the railways than to the Post Office. The Post Office, for example, is handicapped as compared with the railways by the fact that, while the larger part of its traffic in parcels must under present conditions necessarily be conveyed by railway for some part of the journey, the actual points of despatch and receipt of the parcels by the Post Office are not in the large majority of cases adjacent to the railway stations from or at which the traffic is despatched or received by railway.[669] It is, in consequence, necessary in such cases for the Post Office to provide a service between the respective railway stations and post offices.[670] If the railway companies provided adequate collection and delivery services there would be no need for division of the function with the Post Office. In many districts, however, the railway companies would find the provision of any sort of regular and universal service unremunerative, and this is probably the ultimate reason why the State has found it necessary to intervene. In the United States the introduction of a parcel post, and its extension to heavier parcels, was avowedly in a large degree due to the fact that in many parts of the country the railways, which are in private hands, did not provide any service for parcels. Where a service was provided by the railways, the rates and conditions were not satisfactory, and the establishment of a parcel post represents an attempt to prevent the full application of the principle of charging "what the traffic will bear."