“The United States Postal Service is on track to lose $7 billion this year,” – LinkedIn News
The United States Postal Service (USPS) knows how to “lose” money: “The Postal Service is on track to lose $7 billion this year.” But do not be deceived: that is an amazing strategic operating loss (you can also call this loss-leading operations where you expect to capture value in other ways even as you record direct losses in one way).
This is what happens: you can visit a post office in New York, buy a stamp for 50 cents, and send mail to the remote part of Alaska. That delivery may possibly cost the USPS more than $5, but it is happy to charge you 50 cents. But by charging the 50 cents, it ensures that rural America and urban America remain connected for commerce. Why not? If you remove the postal service, a big divide will happen which will result in a broken supply chain, and America does not want the rural and urban parts to become disconnected as that could annihilate the rural economy.
By running those losses (or better subsidies), USPS keeps the rural economy going. But as it does that, the United States government makes up via taxes, made possible by those better logistics and supply chain USPS powers. That is the reason why they continue to focus on improving operations, and not overly increment of prices to become profitable. In the last 22 years, the USPS has not made a PROFIT. (And the US Congress has blocked the Postmaster General from raising rates to achieve profitability by all means.)
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America does it but China is the best in the world when it comes to this. If you live in New York, you can buy an iPhone case from a Chinese vendor on ebay for $1.50 including shipping. Yes, less than $2, and someone will ship a case from China to New York. If you try to buy the same thing within the US, you must go down by at least $7 including shipping.
How is that possible? China subsidizes shipping and supply chain, making China’s products competitive for global commerce. The marginal losses are offset via taxes from the improved economic growth and new employment.
Come to Nigeria: we miss the memo as everyone wants to run a postal service that is PROFITABLE. That is possible since the leaders do not understand that without logistics and supply chain, there is no commerce. A loss-making postal service may be necessary since emails and new digital communication systems have taken out the most profitable segments of the old postal service systems. But since the physical world remains, postal services remain vital for healthy economies.
Good People, we do not model that Nigeria’s postal service can lose $10m to create additional economic output of $2 billion which when taxed can bring $30m additional tax revenue! This is why I hate the idea that all government agencies must be sending money to the federation account. Indeed, that makes it impossible to see the big picture.
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We are extractive by nature here, so nothing is done with advancing prosperity for all in mind, rather the opposite holds. Our system is such that, anything that appears to be costing the government money, the first impulse is to jettison it, irrespective of how beneficial it is to the citizens.
Petrol subsidy was expensive, and therefore was yanked off, that does not mean the country would be richer, instead you only have your miseries expanded. Electricity is expensive, and Nigeria created bands, to charge those it gives substantial electricity into oblivion. It does not matter the adverse effects.
Pegging the naira at a fixed rate was expensive, the government floated it, making sure that you move from bad to worse. Tertiary education is becoming expensive, and the government is reviewing fees upward, then giving you loan. Everything done is to make sure that the government is never responsible for your well-being.
Just think of anything that benefits the masses, your government frowns at such things, and therefore must be cut off. While all the things that could make the economy liquid are being cut off, the three arms of government are getting fatter cheques. They are the only people who are not reducing their profligacy.
“The marginal losses are offset via taxes from the improved economic growth and new employment.” In the case of a private manufacturer who makes phone cases, who subsidizes his logistics?
Does the Chinese government have a supply chain that does that for international routes?