14 Apr These Shoes Were Made for Rent-Seeking
New Balance announced this week that it will intensify its lobbying efforts against the Trans-Pacific Partnership after the Department of Defense refused to accept the company’s bid to become the exclusive supplier of shoes for new military recruits. The news has gotten attention because it hints at how the Obama administration may be bribing companies to support the TPP. That’s an interesting angle, but the incident also highlights New Balance’s long history of rent-seeking and how they intentionally adopt inefficient business practices to curry favor with the government.
Unlike its global competitors, New Balance assembles shoes in the United States. They have a handful of factories in New England that employ about 1400 people. Only about 25% of New Balance shoes sold in America are assembled in its U.S. factories (the rest are imported), and its Made-in-America shoes are manufactured from approximately 70% domestic material.