Privatizing Mail: Lysander Spooner V. U.S. Postal Service

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What was that power? It was, as has been shown, merely a power concurrent with that of the states and people, .. to establish post offices and post roads.” Only a concurrent power, then, having been delegated, and a like power not having been prohibited to the states or people, it necessarily follows, from the terms of the amendment itself, that a concurrent power to establish them is .. reserved” to the states respectively, or to the people-or to both.

Lysander Spooner (P.21 The Unconstitutionality of the Laws of Congress, prohibiting Private Mails. 1844)

Before the founding of private parcel carriers, such as UPS or FedEx, the United States Postal Service had a monopoly on the delivery of small packages. Until one man, Lysander Spooner decided to openly challenge the government’s industry dominance. Ultimately, the U.S. government won the battle. Spooner arguably won the war. His victory immortalized in the fact that he forced the hand of the U.S. Mail service to lower the costs of stamps through his valiant entrepreneurial efforts. Effectively driving the cost of stamps down to actual market rates. Earning the bold political philosopher the moniker “Father of the Three Cent Stamp”. Spooner observing the illegitimate manner in which the government monopolized this service, braving the risk of legal action, decided to create his private mail service. Servicing parcel and letter delivery from Boston through the mid-Atlantic. All the while undercutting the grossly inflated shipping rates set by the government.

Lysander Spooner was born on a rural farmhouse in Athol, Massachusetts on January 19th, 1809. He was one of nine children. It was speculated that Spooner’s fervently religious upbring influenced his later turn towards deism. Along with a commitment to religion, his family also were staunch supporters of the abolition movement. At the age of sixteen, he entered an agreement with his father to work on the farm until he was twenty-five. In exchange, Spooner was provided with food, room and board, and “educational advantages”. After fulfilling his obligation to his father, Spooner worked as a clerk for the Register of Deeds in Worcester, Massachusetts. In 1833, studied law under John Davis while working in his office. Spooner eventually went on to start his legal practice. Acting in defiance of the Massachusetts mandate that lawyers either have a college degree or study five years under a practicing lawyer. Spooner perceived this law as being discriminatory towards the “well-educated poor”. Drawing parallels to the artificial barriers to entry created through state occupational licensing requirements. Spooner even petitioned the Massachusetts General Court to challenge the veracity of this requirement in 1835.

In 1844, Spooner founded the American Letter Mail company. Audaciously announcing the incorporation of his enterprise to the U.S. Postmaster General. Reacting to the skyrocketing costs of postage in the 1840s. The cost of sending a letter from Maryland to Massachusetts was 18.75 cents. Approximately twenty-five percent of workers’ daily wages at the time. Two weeks after his grand announcement Spooner was delivering letters between Boston, New York, and Baltimore. Offering patrons this service for a mere 5 cents per stamp rate. A drastically more economical option than the exorbitantly priced stamps required to be delivered by the USPS. Doing something the Postal Service of the nineteenth century could not accomplish. Deliver mail quickly, efficiently, and all at a fair price. All benefits could not be achieved by the U.S. Mail due to the organization be rife with corruption and bureaucratic red tape. The U.S. Postal Service possessing a monopoly position in the market afforded the organization the ability to set prices.

Naturally, Spooner soon came under fire from the U.S. Post Office. Less than a week of being in business “… Congress introduced a resolution to investigate the establishment of private post offices..”. After only being in business for several months Spooner and a few of his employees were detained for transporting letters by train to Baltimore. After being incarcerated for nearly three months and grappling with other legal troubles Spooner was released from prison. The American public became accustomed to lower postage rates, meaning the U.S. post office had to lower the cost of their stamps. This resulted in many of the customers using private carriers returning to using USPS. This combined with the legal fees incurred through Spooner’s legal battles with the U.S. Government contributed to the bankruptcy of his business. After the failure of his business venture, Spooner went on to be an influential figure in the abolitionist movement.

Spooner was able to give the inefficient appendage of the federal government dedicated to delivering mail a run for its money. Through this market distribution despite the failure of Spooner’s business, he succeeded in lowering the price of postage in the United States. He did so through market forces. Directing the U.S Post Office to follow suit with providing comparable pricing to the public. This was achieved in the absence of legislation or other typical forms of political action. Truly living up to his reputation as an anarchist. Regulation suffers from the lethargy of political processes. Changes made to adjust to market conditions are much more instantaneous. Demonstrated how quickly postage rates dropped after Spooner started delivering letters.

In the spirit of Spooner and his contributions to anarchist political theory, it is interesting how there is a discrepancy between when the government engages in questionable conduct and when a private citizen does. Few questioned the government monopoly on mail delivery, but when a private citizen attempts to bring competition into the market he is ligated out of business. However, when private companies start to dominate specific industries at the end of the 19th century, there was then a moral imperative to break up this concentration of market power. The christening of this crusade was punctuated by the passage of the Sherman Antitrust Act in 1890. It would be fair to respond to this charge of hypocrisy, by stating that when Spooner waged war on the monopoly in letter carrier services there wasn’t any precedence for antitrust law in American jurisprudence at the time. Good point, but even in the light of the fully developed and sophisticated antitrust law we have today there are still state-dominated monopolies on the production of goods and services. The most salient example being defense. Some cling to the Samuelsonian public goods argument for keeping the government monopoly on defense. Keen scholars of political economy may even invoke Coase’s Theorem to justify state provision of defense services. For those who are skeptical of the legitimacy of state intervention, there still appears to be a double standard.

How Antitrust Laws Impede Conservation Efforts

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Introduction:

Quite often capitalism and environmentalism are viewed as being at odds. The very word “industry” conjures up images of factories releasing caustic smog into the air. Filling our waterways with toxic sludge. This perpetuated image is somewhat anachronistic. Stringent environmental regulations strongly discourage such wanton disposal of production byproducts. It should also be noted that the majority of industrial production has shifted overseas.

Despite the persistence of such misconceptions, business interests, and conservation efforts are not antithetical. The proliferation of the “Green” Business movement solidifies this point exquisitely. Environmental consciousness is absolutely imperative for anyone in the business of harvesting natural resources. That includes fishermen, loggers, and even recreational hunters. All groups that have it within their own interest to conserve finite resources. Limited resources in which access is not constrained by definitive property rights.

Due to resources being scant and access unfettered we soon are faced with the Tragedy of the Commons. This concept was first postulated by William Foster Lloyd back in 1833. Then was revived in the modern era and applied to population ethics by Garrett Hardin. Hardin elaborates upon Lloyd’s grazing rights example by stating:

“… the rational herdsman concludes that the only sensible course for him to pursue is to add another animal to his herd. And another; and another…. But this is the conclusion reached by each and every rational herdsman sharing a commons. Therein is the tragedy. Each man is locked into a system that compels him to increase his herd without limit-in a world that is limited. Ruin is the destination..” (Hardin, 1968, P.2) [1].

It only stands to reason that consumption limits need to be placed upon commonly shared resources. Typically, such restrictions take the form of government regulations. Couldn’t private fishing firms merely mutually agree upon daily catch quotas? Per researcher Bruce Yandle “… Ronald H. Coase has taught us, every firm is a transaction-cost minimizer..” (Yandle 1998, P.7) [2]. Another way of putting it is that private firms could more efficiently and effectively coordinate such measures. Private enterprises face one large obstacle and that is antitrust laws. Frequently antitrust laws hamper conservation efforts made by private businesses (Yandel, 1998, P.4)[3]. In this essay, we will examine how mutually agreed upon conservation efforts qualify as antitrust violations.

Per the Law Conservation Collectives = Collusion

Coordinated efforts among private enterprises to conserve a commonly shared resource may be a novel solution. Unfortunately, under current antitrust statues could be defined as a collective effort to constrain competition.  Collusive behavior among competitors is explicitly prohibited under the Sherman Act (1890). Section 1 of the Sherman Act states:

“… every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce…” (Shenfield & Stelzer, 1998, P. 15) [4].

The emphasis on cooperative efforts is considered a major legislative flaw in the Sherman Act (Shenfield & Stelzer, 1998, P. 16) [5].  However, it is broad enough to encompass privately formed conservation collectives. Restricting supply can be construed as an indirect form of pricing fixing. One of the more salient behaviors associated with cartel arrangments (Shenfield & Stelzer, 1998, P. 43)[6]. It seems like such an effort would qualify as an antitrust violation.

The Conspiracy or Cooperation?

The broad interpretation provides some malleability to the application of the law. Which can be a double-edged sword. Above all the intent of Antitrust laws is to act as a form of consumer protection. Insulating patrons from inflated prices and artificially reduced supply (Alder, 2004, P.20) [7].  A laudable goal that could, unfortunately, conflict with other genuine interests such as environmental conservation. For this reason, the courts need to carefully access any potential benefit of the anticompetitive behavior (Adler, 2004, P.21) [8].

Unless protected by statutory exemptions most agreements that seem anti-competitive can be prosecuted under the Sherman Act (Alder, P.10) [9]. The problem becomes that in most cases intentions of the participating businesses are not taken into consideration.  In the case of Manaka v. Monterey Sardine Industries (1941)reflects such a misstep.  Frank Manaka was prohibited from fishing in Monterey Bay by the Monterey Sardine Industries. To make matters worse the local canneries wouldn’t purchase fish from  Manaka. The efforts of the collective were clearly “.. to conserve fish stocks..” (Adler, 2004, P.4) [10].  The court wasn’t on the same page:

“Such an association as that of the boat owners is not freed from the restrictive provisions of the anti-trust act, because they profess in the interest of conservation of important food fish to regulate the price and the manner of taking such fish “unauthorized by legislation and uncontrolled by proper authority.” (Adler, 2004, P.31) [11].

Unless there is clear documentation intentions are subject to speculation. Even there is still the threat of a Per se antitrust violation. Defined as “… the rule permits the court to make a categorical judgment as to the permissibility of a given business practice..” (Adler, 2004, P.22) [12]. Leaving individuals at the mercy of a judge’s digression.  Incredulity towards the claims of colluding businesses seems reasonable. The waters muddied by the faults of human nature.  Cases such as Hawaiian Tuna Packers Ltd. v. Int’l Longshoremen’s & Warehousemen’s Union (1947) the motives were much murkier. The plans to manipulate prices of fish sold to the Hawaiian Tuna Packers cannery by members of Local 150 were not overtly environmentally minded (Alder, P.13) [13].

Have Conservation Regulations Failed?

Informal restrictions in a resource “commons” are far from a new concept. Gentlemen’s agreements managed rights to hunting grounds in medieval Europe. Native tribes indigenous to Pacific Northwest established customary rules for managing salmon fishing (Yandle,1998, P. 9) [14]. It wasn’t until nascent years of the Progressive era that such arrangements became problematic.

In theory, antitrust laws are aimed to protect the customer. However, aren’t “… high-priced fish are preferable to no fish at all?” (Adler, P.11) [15]. This question may sound exaggerated but does hold some merit. Circling back to the case against the Monterrey Sardine Industries, overfishing decimated the fish population in the area (Yandle, 1998 P.14) [16]. Despite the implementation of regulations restricting fishing quotas, 65% of all fisheries are either “.. fully exploited or overexploited…” (Adler, 2004, P.6) [17]. Regulations have made a meager recovery to nearly depleted fish stocks globally. Overall, government initiatives to replenish fish stocks globally have failed (Adler, 2004, P.7) [18].

It is only natural to questions why such efforts end up falling short. It is expected that in the absence of property rights formal restrictions would aid resource conservation. As Bruce Yandle would put it governments often adopt a “one-size-fits-all” solution. When the Canadian government implemented a system of fishing permits, even individuals not actively fishing purchased them. Reducing the fisheries once again to a state of common access (Yandle, 1998, P. 10) [19]. While this is only one example of regulatory failure it demonstrates a common pattern. The porous nature of many regulatory solutions leaves them open to loopholes. Gaps that can be easily exploited.