Opinion: For its own good, and taxpayers' too, privatize Canada Post
Among the purported advantages of regular mail delivery is its predictability. These days, however, the only thing predictable about Canada Post is the frustration.
The federal government's desperate solution to last year's mail strike — a back-to-work order that solved none of the underlying problems — is already unravelling. Pending the outcome of current negotiations, mail carriers could be back on strike starting May 22. Fortunately, there's a far better and more permanent solution to the endless labour woes at Canada Post: privatization.
Around the world, postal services are suffering an existential crisis as texts, email and online bill payments have shoved mail volumes off a cliff. In Canada, letter mail is down 65 per cent over the past two decades. Making matters worse, for political reasons Ottawa has blocked Canada Post's efforts to rationalize its operations through service reductions or by shuttering unprofitable postal outlets. Since 2018 Canada Post has lost a cumulative $3 billion.
Until now these losses have been sustained by drawing down capital reserves. But that can't go on forever. In January, Ottawa lent the Crown corporation $1 billion 'to maintain its solvency and ensure it can continue operations.' Bankruptcy is now a real possibility. If that happens, taxpayers will be on the hook for the entire mess.
Ottawa could amend the national postal charter and end expensive daily delivery, door-to-door service and stand-alone post offices, all of which would reduce the employee head count substantially. Canada Post is also trying to diversify its income by offering banking services and getting into other quirky business lines. But the only way to truly insulate taxpayers from the looming financial crisis is to unload the whole operation.
'There's no particular reason why the government should be in charge of mail delivery,' says Vincent Geloso, a professor of economics at George Mason University in Virginia and senior economist at the Montreal Economic Institute. Public monopolies such as Canada Post inevitably deliver low-quality, expensive service, he observes.
Liberalizing the mail business to allow private firms to compete and then selling off Canada Post wouldn't just improve service for Canadians, it would also protect them from having to bail out the Crown corporation if and when bankruptcy happens. For proof of the benefits of privatization, Geloso points to Europe, which has more than a decade's worth of experience with private mail delivery.
The crowning example is Germany's highly-profitable and well-respected Deutsche Post. Last year it tied for top spot in rankings by the Universal Postal Union, a UN agency that rates the performance of 174 global postal operators. (Canada Post came 15th.) Not only does Deutsche Post deliver the mail quickly, efficiently and inexpensively, it makes money doing so. According to its most recent financial statements, DHL Group, which includes Deutsche Post and parcel carrier DHL, booked a net profit of $5.1 billion — and that's not a case of the parcel business carrying Deutsche Post: it made more than $1.2 billion from its own operations. Canada Post has never, ever had a year like that.
Other notable European postal privatizations include Sweden, Belgium, the Netherlands and Austria. Italy only partially privatized its post to begin with but is now considering selling the remainder to pay down government debt. Britain's lacklustre Royal Mail is often presented as a counter example, but its real problem is that its operations are still tightly controlled by government regulation rather than market forces. Even so, Czech billionaire Daniel Kretinsky recently paid the equivalent of C$6.7 billion to buy it.
As for the overall European experience, postal reform expert Mateusz Chołodecki at the Centre for a Digital Society at the European University Institute in Florence, Italy, says that after more than a decade of liberalization, 'for most Europeans there has been no impact, nothing has changed' with their perception of overall mail service. Except, of course, that any losses are now the responsibility of shareholders rather than taxpayers.
The biggest obstacle to a successful mail privatization in Canada is the always-unreasonable Canadian Union of Postal Workers (CUPW). Amidst the current floundering negotiations — and despite the obvious signs of impending financial catastrophe at Canada Post — the union recently unveiled a PR campaign that declares 'Hands Off My Post Office!'
To solve the problem of union obstreperousness, Geloso recommends offering an initial round of shares exclusively to CUPW members. Not only would this make them partners in the concept, it would also transform Canada Post into a far more efficient company. 'All of a sudden, there would be an incentive (for union workers) to improve productivity and profitability,' Geloso said. A year or so later, the rest of the company could be put up for sale.
To make Canada Post more attractive to investors, Geloso recommends abandoning many of the traditional aspects of Canadian mail delivery, including the single-price stamp for letter mail. 'We allow regional variation in prices for everything from food to insurance,' he said. 'Why should a stamp be any different?'
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Unless decisive action is taken quickly, Canada Post risks becoming a permanent burden on taxpayers. But that cheque is no longer in the mail.
Peter Shawn Taylor is senior features editor at C2C Journal, where a longer version of this article first appeared.
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