Today's Postal Service woes reminiscent of 1842 crisis

By Alasdair Roberts

Los Angeles Times

Published: Friday, Aug. 10 2012 12:00 a.m. MDT

The U.S. Postal Service is in trouble, and there's no telling whether it will survive. It's been battered by the Internet and a dragging economy, besieged by commercial competitors and stymied in its efforts to trim a costly web of post offices and delivery routes. On Aug. 1, it defaulted on a $5.5 billion payment to the U.S. Treasury for future retiree health benefits.

Some think that it's time to privatize the service, bringing an end to one of our oldest federal institutions. The outlook is grim, though the crisis is not unprecedented.

Roll the clock back to 1842. The United States was in the fifth year of an economic crisis that began with the collapse of a speculative bubble in 1836. The financial sector was in ruins. One-third of state governments had defaulted on payments to foreign lenders. The Treasury, once stuffed with cash, was empty. Politics in Washington were toxic. Politicians indulged in "paltry disputes and vile harangues," one newspaper complained, while "measures of the greatest importance are all contemptuously passed over with neglect."

The Post Office Department was caught in the downward spiral. Before the crisis, it had been the pride of the nation. Flush from profits in a booming economy, it had rapidly expanded its delivery network. Between 1836 and 1840, postal routes grew as much as they had in the previous two decades. Almost 3,000 new branches were established.

Americans regarded the Post Office's growth as evidence of the young country's vitality.

As the economy declined, though, postal revenues stagnated. In 1842, the Post Office produced its fifth consecutive deficit, the largest in its history. Nobody in Washington wanted to make politically unpopular cuts to mail service. But legislators also balked at the subsidies that were now needed to pay the Post Office's bills.

Its woes were aggravated by competition from private carriers, which, unburdened by rural and frontier routes, offered better rates to customers on the urbanized East Coast. In theory, the Post Office had a statutory monopoly over mail delivery. But when the government tried to enforce the law in the early 1840s, the courts effectively gutted the ban on competition, and customers flocked to private carriers.

By 1844 the country was seized with the question of what to do with the Post Office. A leading business magazine said that the country confronted "the possibility of an utter overthrow of the whole system of mail arrangements." Some said that the solution was eliminating private competition. Others, the postmaster general conceded, "contend that the Post Office system is an odious monopoly, and ought to be abolished."

This was hardly the only question on which Washington proved incapable of decisive action. The capital was riven by debates over banking regulation, tax policy and relations with Britain, the country's main creditor but also a commercial and military rival. The financial crisis of 1836-39 had mutated into something larger and uglier: a test of the democratic system itself. The country was "like the ocean when convulsed by some terrible storm," said Henry Clay, "agitated upon its whole surface, and at its lowest depths."

Slowly the storm passed. Congress opted to preserve the Post Office by strengthening its monopoly over mail delivery. This bitter medicine for customers was sweetened with the promise of a significant reduction in the postage rate for letters. By the late 1840s, the economy had rebounded and the Post Office was expanding once again.

Of course, the Post Office of the 1840s had advantages not available to today's Postal Service. For many Americans, it was still an important symbol of a rising power. It didn't have to deal with the corrosive effect of the Internet on mail volume. And private competitors of the 1840s didn't have the economic and political clout of their modern-day peers.

The "odious monopoly" might have survived the country's first great depression, but that doesn't mean the Postal Service will be as lucky today.

Alasdair Roberts, a professor of law and public policy at Suffolk University Law School in Boston, is the author of "America's First Great Depression: Economic and Political Disorder After the Panic of 1837." He wrote this for the Los Angeles Times.

Get The Deseret News Everywhere

Subscribe

Mobile

RSS