Question

Our government provides us with many valuable services such as education, public transportation, environmental protection, etc. Over the years, many of its services, such as US postal service, are in direct competition with private firms that happen to be more efficient in providing services. It is evident that the government is not efficient in running a business as US postal service is consistently losing money ($5.6 Billion in 2016)*. Recently, they defaulted on future health payments. **It is especially concerning when both local and state government is in serious budget crunch. The Federal or State government is not in a position to bailout another financially struggling agency. Bottom line, if it is profitable then it should not require any tax payers’ dollars. Maybe, it should be privatized in order to ensure its future existence.***

On the other hand; there are thousands of people who work for the US postal service. These people will lose their jobs if the government decides to close its door. In 1775, the postal service was created under one of the founding fathers of our nation, Benjamin Franklin. Maybe, we should not put a monetary value on a symbolic history of this nation. Maybe, it is our patriotic duty to support the mail system that carries our national flag. Maybe, it’s too big to fail just like Fannie Mae and Freddie Mac. As a result, the government should find innovative means to keep it running.

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Does a government operated business (postal service) have any place in today’s postal service industry? Why or why not?

Does a subsidized postal service create an unfair barrier to entry for small private firms to enter the industry?

Answer 1

Although many private competitors have enetred in the postal service industry in US, but still government operated business holds its value. Documents in government department are posted only through government postal service. The reliability and authenticity lie only in government postal service,soit is much valued.

Subsidized postal service will definitely create a barrier to entry for small private firms as subsidized postal service will reduce the price of postals sent by government postal service and thus attracts more number of customers. As per, Porter's five forces analysis, the threat of new entrants in the industry can be reduced by creating cost advantage.This is thus possible if postal service is offered at a subsidized rates by government operated postal service.