Canada Post vs. the United States Postal Service – Price Gouging vs. Government Bailouts! – November 6, 2018,

Working in the free market actually caused me to delay writing this blog post about Canada Post vs. the United States Postal Office. I remember reading this article and saying to myself I wonder if David Olive ever ran a successful brick and mortar business in his life. It annoys me when non-business people write for us business people as if they understand how unnecessary government involvement destroys people lives and businesses. The article can be read below and my commentary is underneath.

Latest results show Canada Post can deliver – By DAVID OLIVE Business Columnist

Canada Post beats the U.S. Postal Service

If Canada Post was a publicly traded company, rather than a crown corporation, its latest earnings report would be described by Bay Street analysts as “blowing the doors off.”

To start if Canada Post was a publically traded company it would be bankrupt within a few months because it’s employees have a defined benefit pension plan which on their website states the following:

The Canada Post Defined benefit pension plan – The Defined Benefit (DB) component of the Canada Post pension plan provides its members with a pension benefit based on a pre-determined formula.

The pension benefit does not depend on how much members contribute or how well pension fund investments perform.

Even Ontario Teachers don’t have this type of pension, most public sector workers, in general, don’t have this type of pension, because everybody knows that Defined benefit pensions are Ponzi/pyramid schemes where the current workers pay for the retired workers’ retirements. It’s also extremely important to understand that Canada Post is profitable at the expense of the private sector in Canada. The reason USPS is losing money is that they’re not allowed to price gouge the U.S consumer. In the U.S, UPS and other logistics companies can compete with USPS, which obviously means that USPS can’t raise their prices that high all across the board.

In Canada, because Canada Post is a crown corporation no other company can compete with them, Canada Post monopolized almost every segment of postal operations in Canada. So people understand, I’ll give everyone reading a brief education regarding Canada Post.

On October 16, 1981, the Canada Post Corporation Act came into effect. This abolished the Post Office Department and created the present day Crown corporation which provides postal service. The act aimed to set a new direction for the postal service by ensuring the postal service’s financial security and independence.Canada Post – Wikipedia

Yes, in Canada there exists a Canada Post Act, that actually doesn’t allow any company in Canada to Compete with them. This is the main reason why delivery in Canada is so high in the first place, there exists no equivalent in the United States which is why prices are more competitive in the United States which is why the government has to bail them out so often.

It’s not to say that on certain items USPS won’t price gouge U.S customers, but U.S customers have options for similar services using private companies like UPS or FedEx, options, choices competition means that if USPS decides that a particular parcel is going to cost the U.S customer more than what UPS or another courier is charging, the customer can choose to use another company.

To get a brief understanding of operations and competition for USPS in the United States read the section below:

The USPS as of February 2015 has 617,254 active employees and operated 211,264 vehicles in 2014. The USPS is the operator of the largest civilian vehicle fleet in the world. The USPS is legally obligated to serve all Americans, regardless of geography, at uniform price and quality. The USPS has exclusive access to letter boxes marked “U.S. Mail” and personal letterboxes in the United States, but now has to compete against private package delivery services, such as United Parcel Service and FedEx.United States Postal Service – Wikipedia

If Canada Post had to compete it wouldn’t last a week, in fact, chances are it would need a much larger bailout than USPS needs every year. So people understand why these comparisons shouldn’t even be made, USPS is independent while Canada Post is a Crown Corporation. The U.S government, as well as U.S Tax Payers, understands the importance of USPS however as it stands now, no U.S President is dumb enough to allow USPS to dictate political policy to the degree that Canada Post dictates policies in Canada.

That aside what should be mentioned is why USPS is not profitable, it’s not profitable because no government monopoly is ever supposed to be profitable, Crown corporations aren’t supposed to be profitable at the expense of the people they’re supposed to serve. USPS like Canada Post delivers to area’s the private sector would charge more to deliver too, because of this they’re necessary to the public, however that doesn’t warrant them price gouging U.S customers to fund their pensions.

Because FedEx and UPS exist to keep USPS competitive businesses in America are more profitable than they are in Canada. Part of the problem with Canada Post’s relationship with Canadian businesses is that most business people in Canada hate Canada Post and only do business with Canada Post if absolutely necessary.

On a level playing field, Canada cannot compete with the U.S and it has little to do with economies of scale and more to do with our corporatist nature. To get a better understanding, a lot of Canadian companies don’t exist because Canada Posts shipping rates are too high. Brick and mortar aside a lot of companies in Canada are leaving because Canada Post has too much power and is a huge threat to the bottom lines of Canadian businesses.

To best understand why the Canada Post problem is worse than the USPS problem is that USPS does have to worry about competition whereas Canada Post does not. Per capita, Canada Post has a larger workforce than does USPS and the truth is if private couriers were allowed to compete against Canada Post, then Canada Post would have to shrink its workforce. Now, to be fair as it stands now, Canada Post has effectively eliminated its competitors, Canada is a big country in regards to landmass and our current demographics wouldn’t allow an immediate quick fix to package delivery.

In Canada, as an example, neither FedEx, UPS or DHL combined would have the capabilities to do what Canada Post does now, however, if Canada Post were to shrink, which in the future I think is inevitable, Canadians would see rates come down as competition rises. As I will make clear Canada Post and USPS are necessary, you’d be stupid to assume otherwise, the primary problem of both is that they’re too large and serving communities that would be better served by courier companies with a profit motive.

Make no mistake about it, both Canada Post and USPS are important to their respective countries it’s just that people forget that the major reason for the existence of these companies to provide mail and delivery to area’s where the private sector would probably opt to ignore or price gouge. This is why in my opinion Canada Post should be stripped of its crown corporation status and instead strictly be a public utility or be forced to operate as a private corporation with particular portions of it protected to deliver to areas that have proven not be served by the private sector. It’s the function of Canada Post that would warrant a higher rate of pay. The real problem is how do you sell common sense to a public sector that’s unionized?

Major cities don’t need Canada Post, a large portion of Canadians don’t need Canada post, however, this doesn’t mean that Canada Post can’t fairly compete for this market share, but Canada Post doesn’t have to compete whereas USPS does. This is the major reason why USPS isn’t profitable because as everybody knows, it’s impossible for any government entity to be profitable if it doesn’t monopolize at the expense of the consumer, which is why the taxpayer allows these entities to exist in the first place.

There are industries that are protected for a reason, however, one should ask why were these public utilities able to get so large in the first place? When companies get large it’s only natural they’ll become corrupted and profit driven.

Public Sector workers who have Public Sector Unions Will argue: I demand more money for a comfortable retirement, I demand more entitlements than my mail delivery equivalents in the private sector, I work for the government and if the taxpayers don’t increase my pay and benefits I’m going to strike and show people how important I am to their everyday lives.

Quit?

Why would I quit a high paying public sector job, when I can use the power of government to force taxpayers and the private sectors to increase my pay and my standard of living simply by striking, just like my union told me?

I will strike on my own behalf and disrupt the people I serve as well as the private sector for as long as it takes for me to get my way. Give me money and benefits or else the entire country will suffer!

 

Now private mail couriers and all private employees have a right to unionize and strike but see there’s a consequence when they strike, because when customers at a private sector job strike, there’s a chance that the employer might close up shop or increase their pay and pass the cost onto customers who may decide not to shop their anymore, which in turn may cause their profit-driven strike not to be worthwhile.

for Public sector utilities like Canada Post when the Crown Corporation passes costs onto customers and raises the pay of their employees, the private sector courier services not only loses appeal but they too have to raise their costs to attract employees which makes them even less competitive which in turn forces them to raise their prices, which in turn makes businesses dependent on courier services opt to leave Canada or not grow at all. Furthermore, because the barrier to entry is so high in this space particular industries aren’t even created in Canada, which inevitably makes Canada more reliant on imports, which again forces the cost of living up even in larger cities, as parcels delivered within Canada become more expensive than parcels delivered to Canada from foreign countries.

ePacket as an example can use Canada Post to deliver to that same small rural community for less than it costs for a Canadian to deliver that same parcel to that exact same rural community in Canada. Crown Corporations can sign independent deals with foreign nations, so when a person uses the economies of scale argument this is always what I point back to in regards to Canada Post. Again this is why in my opinion Canada Post should be stripped of it’s Crown Corporation status, Canada Post in the instance I just outlined is actually picking sides, ePacket is Chinese owned, so a Chinese manufacturer has an advantage over a Canadian manufacturer. Canada Post is a crown corporation, so of course, Canada Post is going to be more profitable than USPS, it can rip off Canadian consumers and businesses while helping China.

Canadians are becoming increasingly dependent on debt to survive economically and a lot of it is because Canada has a lot of supply management systems and crown corporations in a bunch of different sections of the Canadian economy. Why I bring up Canada Post is because it’s the perfect example of what goes wrong when the government creates a corporate monopoly.

USPS and Canada Post are both profit-driven public services but if a person takes a step back it would be easier to see that Canada Post is far more corrupted than USPS is which is why Canada Post is more profitable. In my personal opinion, public utilities should begin the year in debt and get paid at the end of the year by the taxpayers they serve.

That way their growth would be based on demand and the public would have a say in how they operate. If public servants want money from the public they should show their worth, Unions disrupt this relationship because the government represents the voters in this transaction indefinitely. A properly functioning public sector should always be in debt to the public they serve.

Interesting times ahead.