In the January 21, 2012, issue of The Economist, the main focus of both the feature articles and the special report was on the resurgence of “state capitalism.” The magazine’s reporters described a world in which major companies in major markets were either owned directly by national governments, or subject to control or heavy influence, even if they were privately owned or had issued shares to the public.
The stories reminded me that, for the last 21 years of my Pitney Bowes career, I dealt continuously with the encroachment of state capitalism in the postal sector. In the late 1980’s and throughout the 1990’s, we successfully fought a series of battles with the U.S. Postal Service to keep it from becoming another entity with all the powers and privileges of the federal government, but with none of the regulatory constraints associated with federal government agencies. Several senior postal officials aspired to create a power base similar to many government-owned entities, such as the Tennessee Valley Authority (which Marvin Runyon, the Postmaster General from 1992 to 1998, had led) or the New York-New Jersey Port Authority.
Fortunately, we defeated efforts by the Postal Service to regulate the mailing industry and compete unfairly with it at the same time. The Postal Service leadership teams succeeding Runyon and members of his senior team generally tried to operate within the boundaries set by Congress. We had a very collaborative, and mutually respectful, relationship with the Postal Service during most of my tenure as CEO.
The story was very different outside the United States. While we had similarly respectful and collaborative relationships with the postal officials in the UK, Canada, Spain, Denmark, and Norway, we had a variety of challenges with postal authorities in many other countries.
We saw three distinct challenges:
In Germany, where Deutsche Post realized most of its profits, postal rates were exceptionally high (well above $.60 per piece), service was not exceptional, but competition was ruthlessly suppressed. At the end of 2007, a few weeks before Germany had committed to open its market to full competition from within the EU, Zumwinkel successfully prevailed on German legislators to pass a law that created a minimum wage for postal sector employees only, a wage pegged at Deutsche Post’s minimum pay grade. The immediate result was to destroy its two largest mailing competitors, since neither could secure labor cost advantages over Deutsche Post.
In Italy, Poste Italiane took advantage of complex and onerous labor laws to fend off competition, since these laws made part-time and temporary workers prohibitively expensive.
Postal operators have played heavily in the money transfer business (competing with Western Union), in retail government services, in the sale of greeting cards and stationery, and in the sale of gift items often transmitted through the mail. Postal operators like Australia, China, Finland, and Sweden moved seamlessly into mail services businesses. In countries with a strong tradition of state capitalism, these postal operators were able to operate freely in more businesses in which they competed unfairly with the private sector.
I was able to experience the ugly underside of state capitalism for over two decades. It made me realize that the United States should think long and hard about migrating down the path these other countries have followed. It also is a cautionary tale for large multinational corporations that aspire to compete fairly in major markets in which one or more of the competitors are state-owned or state-controlled enterprises, or in which the state considers a particular industry strategically important.