Conceived in Liberty Volume 2 - Ludwig von Mises Institute

None of these actions and restrictions had gone beyond one or two colonies.
The true monopolization of the entire American postal service came in
1692, when the king granted a "patent" of monopoly privilege over all the
American colonies for twenty-one years to Thomas Neal, a court favorite
whom he designated as postmaster general. Neal's agent in operating the post
was Andrew Hamilton, who also served as governor of East New Jersey and
who persuaded some colonial Assemblies to pass legislation enforcing the
monopoly. Thus, a New York law of 1692 prohibited posts from competing
with Hamilton's, and prescribed postage rates ranging from four and one-half
pence for nearby mail to twenty-four pence to more distant colonies. The
enormous rise in postal rates from the days of free competition make clear
how valuable the monopoly privilege was. Most of the colonies followed suit.
The particularly free and independent colonies of Rhode Island and North
Carolina, on the other hand, passed no enabling legislation at all.
Despite the enormous rise in rates, the postal monopoly suffered net losses,
for the service was slow and inefficient—and undoubtedly Hamilton had
priced himself out of the consumer market. But, typical of monopolists, his
only suggested remedy was to raise the rates still further: from six pence to
forty-two pence per letter. The U.S. postmaster general, however, incisively
held that the proposed rates were much too high and that a greater revenue
would be obtained by lowering rather than raising the rates, for then "the
easy and cheap correspondency thus encouraged people to write letters." He
also charged that the colonial governments did not grant enough subsidies to
the posts and were insisting on free and special-delivery transmissions of all
governmental letters. On Neal's death the patent of postal privilege fell partly
to his creditor, Hamilton, and after Hamilton's death in 1703, the latter's
creditors carried on the work.
In 1707, however, the Crown refused to consider renewing the grant and
instead purchased the privilege back from the owners, for somewhat less than
seventeen hundred pounds. The American postal service became from that
point on a Crown monopoly. The Crown moved immediately to raise its
postal rates. In the Act of 1711 it established a range of some four pence to
six pence on local mail to one shilling six pence on letters to distant colonies.
The act also appointed a royal postmaster general for the whole empire, with
a deputy postmaster general stationed in New York to run the post for the
English colonies on the American continent. The colonies proceeded to evade
the postal monopoly and its charges more than ever before. Officially the bulk
of the colonies accepted the imposition without protest, with the honorable
exception of Virginia. Virginia pointed out that the establishment of postal
rates by the Crown in effect constituted taxation, and a crucial point in
Crown-colony relations was always that England could not impose taxation on
the colonies without the consent of their Assemblies. The Virginia House of
Burgesses therefore refused to grant any money for the post office and also
passed laws crippling its operation. Virginia, however, was induced to join
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