Trump’s Complaints About Amazon Have a Historical Precedent
The fraught history of government-subsidized package delivery
In the early 1900s, Charlie Harger, a writer for this magazine, visited a small country store on “the frontier” to talk to its proprietor. (He did not mention, in the eight full pages of the story where exactly that small retailer was located, because that’s how journalism was done in those days.) The unnamed proprietor was looking out beyond his windows stocked with hoes and pancake flour, to the parcels sitting at the train depot that were mail-ordered from Chicago and New York. The rise of mail-order delivery was going to drive him out of business, he worried.
“It’s getting so that the farmer can live 10 miles from town and even buy his groceries in St. Louis or New York and have ‘em delivered without leaving the place. It means that we might as well shut up shop,” he told Harger.
Just how package delivery should work and whether it would ruin local businesses was a hotly contested issue in the early 20th century, and the debate about the role that the Postal Service should play in delivering packages from private merchants lasted for decades. That angst continues today. President Trump has been ramping up his criticism of Amazon, tweeting Thursday that the company “use[s] our Postal system as their delivery boy (causing tremendous loss to the United States), and [is] putting many thousands of retailers out of business!”
Trump and other critics say that Amazon is disrupting local retail by offering free delivery and low prices for items sold remotely that local small businesses could otherwise sell. They say that by delivering Amazon packages to rural and far-flung consumers for low rates, the Postal Service is helping advance this switch to e-commerce, and getting paid too little to do it. One analyst wrote, in the Wall Street Journal, that the Postal Service charges Amazon about $1.46 per package less than it costs the service to deliver them. “This subsidy is speeding up the collapse of traditional retailers in the United States and providing an unfair advantage for Amazon,” wrote Josh Sandbulte, the copresident of Greenhaven Associates, a money-management firm that owns FedEx stock.
But Trump and his supporters, who are, after all, concentrated in rural areas, might find the absence of the Postal Service in the package-delivery market even more disturbing. Without a government presence in package delivery, private delivery services like FedEx and UPS might hike up prices to consumers in far-flung locations. That was the reality before 1912, when Congress authorized Parcel Post, which allowed the Postal Service to start delivering packages for lower rates.
The debate over whether the Postal Service should subsidize the delivery of packages to consumers’ homes was just as fraught then as it is now. “The simple act of carrying a parcel from Chicago to a farmer’s lane became freighted with a panoply of issues agitating the nation,” Richard Kielbowicz, a professor at the University of Washington, wrote in a history of the debates over the U.S. Parcel Post. The issues then were very much same as the issues today—whether consumers everywhere had a right to get cheap products delivered to their doorstep, and if so, what role the government should play in facilitating the process.
At the turn of the century, the Post Office delivered letters and periodicals all across America. Through a service called Rural Free Delivery, it even went to far-flung rural locations. But charges for anything weighing more than four pounds were so exorbitant that few people received any packages from the Postal Service. It charged about $320 a ton for delivery, when railway-express companies would charge $28 for the same haul, according to Kielbowicz. People who wanted to order from the burgeoning catalog business had very limited options, Kielbowicz told me. They basically could shop at their local stores, where goods were more expensive than in the catalogs, or order things by catalog to be delivered by railroad freight or railroad express, which added on all sorts of costs and fees. Rural families, who still made up the majority of Americans at the turn of the century, were thus unable to access the same goods as people who lived in big cities.
That’s partly why rural groups like The Grange and other populist organizations began advocating for Parcel Post as early as 1887. Allowing the Postal Service to deliver packages would give rural consumers access to the same goods as people living in big cities, they said. Consumer advocates also argued that allowing the Postal Service to do package delivery would help save money for homemakers concerned about the rising cost of living.
“The women of the country are very much concerned in getting articles for their homes cheaper than they can get them now, and they believe the parcel post will help them in that direction,” Harriette J. Hifton, a Consumer’s League member and suffragette, told Congress during the parcel-post debates, according to Kielbowicz. Consumers and producers alike wanted to eliminate the middleman in the shopping process.
On the other side, small retailers and railroads railed against the idea that the government should get involved in delivering packages. Extending government to the private-sector business of delivering packages would be a disaster, they warned. It would force small-town retailers out of business and it would allow manufacturers to sell by mail inferior and poorly-produced products. Plus, they said, the idea of Parcel Post wouldn’t work. “The Postal Department as now organized and operated would be utterly unable to compete with express companies upon purely a business basis,” an essay in the Journal of Political Economy argued.
But these business interests were unable to compete with an alliance of two unlikely groups: rural farmers and progressives in big cities who hated the railroads and wanted the government to have a larger role in many facets of American life. The Constitution, progressives argued, gave the government control over the mail, and so the Postal Service should expand, compete with the railroads, and reduce the cost of delivering packages to all Americans.
These debates came to a head in 1912, after voters ousted Republicans in 1910. Democrats, who had their first majority in the House since 1894, held hearings on the Parcel Post, and ushered through the passage of a bill in August of 1912 establishing the Parcel Post. They did not establish a government monopoly over parcel delivery—though that had been one proposal—but instead created a government delivery service that competed with private firms. The service, which launched in 1913, was instantly popular with Americans clamoring for cheaper goods. In the first year of Parcel Post, for example, Sears handled five times as many orders as it had the year before, and within five years, its revenues had doubled.
Today, the fact that the Postal Service does package delivery has allowed private companies to step out of the very expensive business of bringing packages to some rural areas. Almost immediately after the establishment of the Parcel Post, express companies stopped competing with Parcel Post in many small towns, according to Kielbowicz. But this is also partly why the Postal Service is not as profitable as private companies are today. It has an obligation to deliver mail and packages almost everywhere. FedEx and UPS do not. It loses money on its rural operations, which Congress periodically proposes closing.
President Trump seems to be particularly distressed about the fact that the Postal Service charges Amazon less than it costs to deliver a package. But this is partly a legacy of the history of package delivery in America. Delivering packages is not necessarily expensive, but delivering them everywhere the Postal Service goes is. The Postal Service offers Amazon, like other e-commerce retailers, bulk rates. It may lose money on some of the packages it delivers for Amazon, but it also makes money on some of those packages. To make money on every package, it would likely have to stop serving the rural communities Congress said it had to serve by package delivery in 1912.
Rather than obsessing about the role of Amazon in package delivery, Trump and critics of the Postal Service might instead need to think about where they stand in the debates of the early 20th century about access to commerce. If they believe, as the Populists and Progressives of the 1900s did, that everybody should have access to low prices and a wide array of goods, criticizing the Postal Service for carrying packages for Amazon is not necessarily productive. They might do better to blame the Congress of more than a century ago, which decided that not only could the government take on the costs of delivering packages everywhere, but also that it should.