第6章 A Comparative Study on Home Production Rate …

第 6 章 A Comparative Study on Home Production Rate
Between United States and Japan
Fumitake MATSUMURA* and Kiyoshi FUJIKAWA**
1. Preface
This paper examines the over-time changes of the “Home Production Rate” in the
United States and Japan during the years 1970 and 1990.

This comparison of Home

Production Rate is done both theoretically and empirically through three such different
concepts as Self-sufficient Home Production Rate (SSHPR), Direct TechnologicalHome Production Rate (DTHPR) and Value-added Home Production Rate (VAHPR).
The purpose of this study is to clarify the features of both countries as independent
national economies by investigating their domestic economic structure in regard to
production of goods and services. And, this study is, at the same time, a proof of ourassertion that the present economic system is in a stage of “the multi-national
capitalism1”.
2. Explanation of Home Production Rate
First, let us define “Self-sufficient Home Production Rate”(SSHPR).

SSHPR is theshare of the domestic production in total demand and is sometimes called simply “Selfsufficient Rate”.

Taking the i-th industry as an example, the total demand in thedomestic market is the summation of domestic production X i and imports M i ， X i + Mi
Then, Self-sufficient Home Production Rate (SSHPR), τ iS , is defined as the equation (1).
(1)

τ iS = X i /( X i + M i )Second, we will define “Direct Technological Home Production Rate” (DTHPR).
DTHPR is the share of domestic input that is the total of domestic intermediate input
and value-added in the total input. This name is derived from technological relations
on the production side where a certain amount of raw material or labor force is* Professor of Osaka University of Economics, Faculty of Economics. Address: 2-2-8, Osumi, Higashi-Yodogawa,
Osaka, 533-8533, Japan. Email:bamboo@sun.email.ne.jp** Professor of Konan University, Faculty of Economics. Address: 8-9-1, Okamoto, Higashi-Nada, Kobe, 6588501, Japan. Email: fujikawa@konan-u.ac.jp
1 Multi-national capitalism is a stage of capitalism where the main players are multinational enterprises that havetheir subsidiaries with local juridical rights in plural countries, and these enterprises attain economic globalization
through international business activities (internationalization of comparative advantage) with a global point of view.

6-1

necessary to produce a certain amount of output.
produced input is all regarded as domestic input.

In this criterion, domesticallyLet us write domestic intermediate

input to j-th industry from i-th industry X ijd (then the total of domestic input to j-thindustry is ∑ X ij ) and value-added v j .
dDirect Technological Home ProductioniRate (DTHPR), τ Tj , is thus defined as equation (2).
(2)

τ Tj = ( ∑ X d ij + v j ) / X jiHowever, it is natural that domestically produced input cannot be produced without
indirectly imported parts or materials. Therefore, paying attention to this respect, we candefine “Value-added Home Production Rate” (VAHPR) as the share of net domestic
input in the total input.

This criterion is explained as follows. Generally speaking,input in a production process is divided into such three categories as domestic goods,
imported goods and value-added. But, the production of the domestic goods again
requires the same three kinds of above-mentioned input: domestic goods, imported
goods and value-added. Therefore, infinite repetition of this division will ultimately
result in a dichotomy of input: ultimate imported input and ultimate value-added.

Thatis why, we name the rate of the latter to the total output “Value-added Home ProductionRate”.
This criterion can be expressed as follows based on the framework of Input-Output
Analysis.

The demand-supply equilibrium condition of the Input-Output model iswritten as equation. (3):(3)

X = Ad X + F d ,where X is a vector of domestic output,

Ad is the technological input coefficientdddmatrix, Aij = X ij / X j , and F is a vector of final demands for domestic goods.

Solving equation (3) with the output X gives the following output determination
equation.
(4)

X = ( I − A d ) −1 F d ,where matrix I is a unit matrix all diagonal elements of which are one. The matrix( I − Ad ) −1 is called Leontief's Inverse Matrix that has a similar meaning to theKeynesian multiplier. Since VAHPR of j-th industry, τ j is translated as the total ofV

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第6章 A Comparative Study on Home Production Rate …

value added ultimately induced by a unit production of final demands of j-th industry, it
can be defined as the following equation (5):(5))

τ V = ιv ( I − A d ) −1 , τV)= [τ 1V , τ V2 , L , τ Vn ]where v is a diagonal matrix with value-added rates andι is an aggregation row

vector whose elements are all one.
It would be worthy to point out that SSHPR (or self-sufficient rate) has a different
point of view from DTHPR and VAHPR.

Namely, SSHPR is a rate of domestic

supply against the total demand, while the latter home production rates are the rate ofthe domestic goods in the total input.

More concretely, SSHPR of rice in Japan, forexample, is almost 100% since the domestic rice almost satisfies the domestic rice
market, but DTHPR is less than 100% if Japanese rice farmers use imported fertilizer
and herbicide as input. On the other hand, as to coal in Japan, its SSHPR is very low
as the domestic supply keeps decreasing, but DTHPR of Japanese coal is nearly 100%
as long as the Japanese coal miners hire Japanese workers and use Japanese equipment
and machinery for coal mining.
2.

We can see these examples in Table6-1 and Table 6-

As shown in Table6-1 SSHPR of Japanese mining is, as is well known, low (29.9%

in 1970 and 13.3% in 1990), while as shown in Table6-2, DTHPR of Japanese mining
is extremely high (99.4% in 1970 and 98.4% in 1990).

In the next section, we will

pick up some characteristics of home production rates in different criteria of Japan andthe United States using Input-Output tables based on the above discussion.

6-3

Table6-1

Self Sufficiency Rate
Japan
1970
80.8
29.9
94.2
97.1
96.5
97.7
94.0
92.1
91.3
99.2
99.2
98.0
83.9
99.3
95.3
81.3
98.0
97.8
98.3
99.5
99.1
49.7
90.1
90.9
100.0
100.0
99.2
98.8
94.3
99.5
99.5
99.6
99.7
100.0
100.0
92.7

1 Agriculture, forestry & fishing
2 Mining & quarrying (including crude oil)
3 Food, beverages & tobacco
4 Textiles, apparel & leather
5 Wood products & furniture
6 Paper, paper products & printing
7 Industrial chemicals
8 Drugs & medicines
9 Petroleum & coal products
10 Rubber & plastic products
11 Non-metallic mineral products
12 Iron & steel
13 Non-ferrous metals
14 Metal products
15 Non-electrical machinery
16 Office & computing machinery
17 Electrical apparatus, nec
18 Radio, TV & communication equipment
19 Shipbuilding & repairing
20 Other transport equipment
21 Motor vehicles
22 Aircraft
23 Professional goods
24 Other manufacturing
25 Electricity, gas & water
26 Construction
27 Wholesale & retail trade
28 Transport & storage
29 Communication
30 Finance & insurance
31 Real estate & business services
32 Restaurants & hotels
33 Community, social & personal services
34 Producers of government services
35 Other producers
Simple Average

The United States
1990
85.6
13.3
89.8
85.0
88.2
97.4
91.8
93.0
84.3
97.0
96.9
97.3
70.9
98.4
93.3
93.4
96.6
95.3
97.3
98.3
97.2
55.6
88.8
90.2
100.0
100.0
99.6
91.3
95.1
99.4
97.6
98.8
99.5
100.0
99.7
90.7

(note) The production of 35 th industry was negative in the IO table of the U.S. in 1990 , so thisexcluded from the calculation of this study.

1972
97.6
88.0
96.3
92.2
91.8
96.3
96.5
96.6
91.7
94.8
95.5
90.9
90.0
96.8
94.7
91.5
95.2
89.6
96.0
86.9
89.2
97.0
92.7
86.8
99.3
100.0
98.6
100.0
98.5
100.0
99.8
100.0
100.0
100.0
19.5
92.9

1990
96.2
76.8
94.5
73.2
90.8
95.1
92.4
89.8
86.3
90.0
90.1
87.8
88.6
92.1
85.1
72.7
82.5
70.5
94.2
87.9
72.8
92.9
86.1
66.6
99.1
100.0
98.7
100.0
98.9
100.0
99.2
99.9
99.9
100.0
―――
89.7

industry was

3. Comparison of Self-sufficient Home Production Rates (SSHPR) and Valueadded Home Production Rates (VAHPR)
Let's see the self-sufficient home production rate of each industry of the UnitedStates and Japan in Table 6-1.

SSHPRs in Japan decreased by three points or moreduring the 20 years from 1970 to 1990 in such seven industries as 2)Mining (including
crude oil), 3)Food, Beverages & Tobacco, 4)Textiles, Apparel & Leather, 5)Wood
Products & Furniture, 9)Petroleum & Coal Products, 13)Nonferrous Metals, and 28)
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第6章 A Comparative Study on Home Production Rate …

Table6-2

Direct Technological Home Production Rate
Japan
1970
99.0
99.4
90.0
92.9
82.3
97.1
95.5
96.7
60.4
95.2
95.0
93.2
74.0
99.3
98.8
97.5
96.7
98.2
99.4
99.1
99.3
81.8
98.2
97.3
93.8
99.2
98.9
98.5
93.9
99.7
99.6
99.8
98.6
100.0
99.6
94.8

1 Agriculture, forestry & fishing
2 Mining & quarrying (including crude oil)
3 Food, beverages & tobacco
4 Textiles, apparel & leather
5 Wood products & furniture
6 Paper, paper products & printing
7 Industrial chemicals
8 Drugs & medicines
9 Petroleum & coal products
10 Rubber & plastic products
11 Non-metallic mineral products
12 Iron & steel
13 Non-ferrous metals
14 Metal products
15 Non-electrical machinery
16 Office & computing machinery
17 Electrical apparatus, nec
18 Radio, TV & communication equipment
19 Shipbuilding & repairing
20 Other transport equipment
21 Motor vehicles
22 Aircraft
23 Professional goods
24 Other manufacturing
25 Electricity, gas & water
26 Construction
27 Wholesale & retail trade
28 Transport & storage
29 Communication
30 Finance & insurance
31 Real estate & business services
32 Restaurants & hotels
33 Community, social & personal services
34 Producers of government services
35 Other producers
Simple Average

The United States
1990
98.5
98.4
93.0
92.1
88.0
96.2
90.6
96.5
51.8
96.5
96.6
95.1
67.6
98.1
97.4
95.8
95.7
96.6
98.2
98.1
98.7
75.1
96.6
97.7
88.5
98.1
98.7
96.1
96.0
99.4
99.0
99.3
98.3
100.0
98.1
93.7

1972
98.6
98.9
97.2
96.3
96.6
96.5
97.3
98.3
92.2
97.6
98.2
93.5
89.3
96.7
97.8
97.5
97.7
97.3
97.4
96.0
96.1
97.8
97.2
93.0
98.4
98.7
99.8
98.7
97.9
98.8
99.7
99.8
98.7
100.0
100.0
97.3

1990
97.9
97.3
97.1
93.3
96.5
95.6
94.6
97.0
77.5
95.3
97.0
95.4
91.5
95.1
95.1
86.4
94.5
91.1
95.3
93.1
89.8
94.8
95.2
94.1
95.7
97.5
99.3
97.9
96.3
96.4
99.3
99.5
98.4
100.0
―――
95.0

Transport & Storage. SSHPRs of the heavy and chemical industrial section also
showed a decline, but the degree was rather marginal compared with the abovementioned industries. On the contrary, SSHPRs have risen greatly in 16)Office &Computing Machinery and 22) Aircraft.
On the other hand, in the United States, SSHPRs in 17 industries among the total 35
industries were applicable to this “3% decline criterion”.

The most extreme examples

are 16)Office & Computing Machinery (decline from 91.5% to 72.7%) and Motor
Vehicles (decline from 89.2% to 72.8%).

We can observe from these figures the

6-5seriousness of the decline of SSHPRs in American major manufacturing industries2.
Next, taking a look at Table 6-3 of Value-added Home Production Rate (VAHPR),
there are only 5 such industries in Japan whose value added home production rate
decreased by 3% or more: 7)Industrial Chemicals, 9)Petroleum & Coal products,13)Non-ferrous Metals, 22)Aircraft, 25)Electricity, Gas & Water.

Among them, only

VAHPRs of 9) Petroleum & Coal products and 13)Nonferrous metals have declined aslargely as their SSHPRs.

VAHPRs in Japan remain around the 90% level on thewhole in the main sections such as 14)Metal products, 15)Non-electrical machinery,18)Radio, TV & communication equipment, 19)Shipbuilding & repairing, 20)Other
transport equipment, 21)Motor vehicles, and 24)Other manufacturing.

That is an

inheritance of Japan’s so-called “one-set type” structure of the national economy.
These figures mean that the Japanese reproduction networks (or, industrial relations of
input-output structure) are almost complete domestically within Japan, especially in themain manufacturing industries.
On the other hand, the situation as to VAHPR in the United States is also
considerably different. Namely, VAHPRs in the United States have also declined
largely during the same period as well as self-sufficient home production rates.

Eventhough the number of industries whose VAHPR declined by 3% or more is 13 which isless than 17 in SSHPR, the absolute level of decline was much larger than the Japanesecase.

And it is particularly notable that VAHPRs are smaller than SSHPR in as manyas 18 industries in 1990.
They are 1)Agriculture, forestry & fishing, 3)Food, beverages & tobacco, 6)Paper,
paper products & printing,7)Industrial chemicals,9) Petroleum & coal products,13)Non-ferrous metals, 14)Metal products, 19) Shipbuilding & repairing, 22)Aircraft,25)Electricity, gas & water, 26)Construction, 27) Wholesale & retail trade,28)Transport & storage, 29)Communication, 30)Finance & insurance, 31)Real estate &business services, 32)Restaurants & hotels, and 33) Community, social & personal
services.

2 These two industries also recorded great reduction in the other two criteria of home production rates, as we will see
later in this report.

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第6章 A Comparative Study on Home Production Rate …

Table6-3

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35

Value-Added Home Production Rate
Japan
1970
95.8
93.9
85.8
85.4
76.0
92.2
88.3
93.7
58.7
89.4
89.8
78.8
62.6
90.0
90.9
90.6
87.0
91.3
91.8
91.4
91.3
76.1
91.5
89.9
89.7
91.7
96.8
92.9
90.1
98.9
99.1
98.3
96.0
100.0
98.6
89.3

Agriculture, forestry & fishing
Mining & quarrying (including crude oil)Food, beverages & tobacco
Textiles, apparel & leather
Wood products & furniture
Paper, paper products & printing
Industrial chemicals
Drugs & medicines
Petroleum & coal products
Rubber & plastic products
Non-metallic mineral products
Iron & steel
Non-ferrous metals
Metal products
Non-electrical machinery
Office & computing machinery
Electrical apparatus, nec
Radio, TV & communication equipment
Shipbuilding & repairing
Other transport equipment
Motor vehicles
AircraftProfessional goods
Other manufacturing
Electricity, gas & water
Construction
Wholesale & retail trade
Transport & storage
Communication
Finance & insurance
Real estate & business services
Restaurants & hotels
Community, social & personal services
Producers of government services
Other producers
Simple Average

1990
94.8
93.4
88.6
85.8
82.7
91.7
82.1
92.7
49.3
89.3
91.8
84.0
57.4
90.5
91.8
90.7
88.9
91.2
91.9
91.7
91.8
69.6
92.0
91.6
84.9
93.7
97.1
92.6
92.5
98.5
98.0
98.3
96.0
100.0
95.5
88.9

The United States
1972
1990
96.4
94.4
97.8
95.2
94.3
93.2
92.6
88.1
94.1
92.9
94.2
92.2
94.8
90.3
96.9
94.7
89.9
73.1
95.3
91.1
96.4
93.7
90.4
91.0
82.3
84.6
92.6
90.7
94.6
91.4
94.9
82.2
94.3
90.3
94.7
87.1
94.4
91.8
91.7
88.1
91.9
83.3
95.3
90.7
95.1
92.4
89.9
90.5
96.9
92.2
96.2
94.3
99.3
98.1
96.6
95.7
96.5
93.5
98.3
95.5
98.9
98.1
99.2
98.6
97.4
96.5
100.0
100.0
―――
100.0
95.0
91.6

In the observation of this section, we already confirmed that home production rates
in the United States decreased remarkably in the period of 1972 to 1990, and we also
saw that Japan’s home production rates are also in a decreasing trend.

Though, asmentioned above, the decline of home production rates is equivalent to the increase ofleakage of “value” from the domestic economy to economies abroad; thus we should
remember this situation simultaneously contributes to formulate a base of globalizationin the production structure.

Taking into consideration that the GDPs of both theUnited States and Japan grew greatly in the same period, we can conclude that the world

6-7

economy has changed in a plus sum economic game with a decreasing home production
rate by mutual leakage of value-added.

This is another expression of a step-by-step

deepening of the multi-national capitalism.
4. Reversal phenomenon of value added home production rate
What we take up in this section is a reversal phenomenon in VAHPR in the mainindustrial sections between the U.S. and Japan. Observe the bottom line of Table 6-3
that shows the simple average of VAHPR of all industries. We can see that VAHPR in
the United States in 1972 is 95.0% while Japan’s in 1970 is 89.3%, which is as much as
5.7 points below the U.S. case.

Also in 1990, American VAHPR is larger than inJapan’s case, where each average is 91.6% and 88.9% respectively and the difference
largely shrinks to 2.7 points.
However, when we compare details of VAHPR in each industrial sector, what we
may overlook in the simple average comparison can be read.

American VAHPRs weresuperior to Japan’s in almost all 35 industrial sectors in 1970, but in 1990 VAHPRs 9 ofJapan’s industrial sectors turned out to be superior to their American counterparts3.
Moreover, these 9 industrial sectors include such high-tech or key industries as 15)
Non-electrical machinery, 16)Office & computing machinery, 18)Radio, TV &communication equipment, and 21)Motor vehicles. That shows that a hollowing out of
the U.S. industry proceeded during that period and suggests that its production capacity
and competitiveness declined remarkably on the whole in the national economy.

Thissituation would provide a background to Reganomics, which is characterized by supply
side economics based on tax reduction and deregulation and also might prove indirectlythat Japan-bashing was inevitable. In short, American capitalism has accomplished an
evolution to multi-national capitalism during this period.

On the other hand, theAmerican domestic economy, because of this phenomenon, was suffering from twin
deficits that led to economic stagnation in 1990.

3 It is clear that the reason for this phenomenon is not that Japan’s value-added rate increased during 20 years asshown in Table 6-3.

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第6章 A Comparative Study on Home Production Rate …

In such circumstances, what contributed to overcome the economic recession wasdevelopment of the information service industries.

Namely, by compensating for

declining home production rates in the manufacturing sectors by expansion of high-techand information industries, the Unites States could succeed in the improvement of its
employment rate and income in the entire national economy.

This provided a typicalexample of prescription for the contradiction in the American economy according to its
multi-nationalization.

The reason why this is a typical example is that the U.S.

economy got over its difficulty of its decline of home production rates in manufacturingsectors through enhancement of its domestic tertiary industry leveraged by high-techand information technology.

Generally speaking, an economic structure shifts its

center of gravity from primary, secondary to tertiary sectors according to economic
development4.
5. Difference between Direct Technological Home Production Rate (DTHPR)
and Value-added Home Production Rate (VAHPR)
Rules of Origin in international trade agreement legitimize several standards and oneof them is a “standard of last substantial processing place” in the production process ofa commodity.

The empirical analysis in the previous section provided an interesting

result regarding this.

As shown at the beginning of this report, DTHPR regards

whatever is domestically produced as domestic input.

But, VAHPR excludes foreign

input contained in domestically produced input. The difference between them matterssince it is based on the difference of production element endowment and comparativecompetitiveness.

In this section, therefore, we review the difference of these two types

of home production rates in the United States and Japan in 1970 and 1990.
First, we refer to the bottom line (average of all industries) of Table 6-2 and Table
6-3.

In 1970, DTHPR of the Japanese average is 94.8% and VAHPR of the Japanese

average is 89.3%; therefore, the difference is 5.5 points.

In the United States in 1972,

the same statistics are respectively 97.3% and 95.0%; therefore, the difference is no
more than 2.3 points.

4 This briskness gave birth to “the new economy theory” without cyclical boom and recession. Thanks to theAmerican economic boom, President Clinton could submit the 1999 budget with a 9.5 billion dollar surplus after aninterval of 30 years (Nikkei, Feb 2 in 1998 evening). However, the financial disease of a Black Monday type(maximum debt country) in addition to the aspect of the bubble stock prices has not been overcome yet. The
amount of foreign debt at the end of 1996 reached as much as 870.5 billion market dollars (US. Department ofCommerce, Survey of Current Business, October in 1997).

6-9

However, in 1990, they change respectively to 93.7% and 88.9% in Japan, while
they change to 95.0% and 91.6% in the United States.

The difference between

DTHPR and VAHPR for each country is 4.8 points in Japan and 3.4 points in the
United States.

This observation has two important meanings.

The first is that theAmerican home production rates are higher than in the Japanese case whichever thecriterion may be, DTHPR or VAHPR. The second is that Japan’s difference between
DTHPR and VAHPR become closer (from 5.5 points to 4.8 points), while that of theUnited States grew wider (from 2.3 points to 3.4 points). The declining trend ofJapan’s domestic input rates was comparatively weaker than the American case, thus, asa result, Japan’s VAHPR is growing closer to America’s.
Next, we will see the change of DTHPRs of individual industrial sectors.

Let usbegin with picking up industries where American DTHPR is higher than Japan’s by
three points or more in 1970.

The industrial sectors which fall in this criterion are 3)

Food, beverages & tobacco, 4)Textiles, apparel & leather, 5)Wood products & furniture,9)Petroleum & coal products, 11)Non-metallic mineral products, 13)Non-ferrous metals,22)Aircraft, 25)Electricity, gas & water. A similar tendency for these industries has
5been maintained in 1990 .

That clearly expresses the characteristic of American

capitalism where the first 5 sectors have comparative advantage thanks to resource
endowment and where aircraft also has comparative advantage owing to its
technological superiority.

On the other side, the industrial sectors where Japan’s

DTHPR is higher than America’s in 1970 are such 11 sectors as 6)Paper, paper products& printing, 14)Metal products, 15)Non-electrical machinery, 16)Office & computing
machinery, 18)Radio, TV & communication equipment, 19)Shipbuilding & repairing,20)Other transport equipment, 21)Motor vehicles, 23)Professional goods, 24)Other
manufacturing, and 26)Construction.

But the differences (Japanese superiority) with

their counterparts in America are as relatively small as 0.6, 2.6, 1.0, 0.0, 0.9, 2.0, 3.1,
3.2, 1.0, 4.3 and 0.5.

5 We want to stress that a 1% difference is considerably large since this 1% means 1% of the whole value of output
of each industry.

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第6章 A Comparative Study on Home Production Rate …

However, the situation changes in 1990. Especially, the Japan – USA differencesin 16)Office & computing machinery and 21)Motor vehicles expand to 9.4 and 8.9
points in 1990.

And differences in 18)Radio, TV & communication equipment and19)Shipbuilding & repairing also increased to 5.5 and 2.9 points respectively in 1990.
These results relate how quickly the comparative advantage structure changed during
these 20 years.

These results are also informative in a political economic point of view

since we can compare quantitatively element endowment rates with comparativeadvantage and classify changing patterns of comparative advantage and types ofcapitalism.
The third point that we should take into consideration as to Table 6-2 and Table 6-3
is how to handle the last country of the processing.
the share of domestic input is.

The higher DTHPR is, the higher

And the lower the value-added rates of domestic input

are, the larger the difference between DTHPR and VAHPR is. In other words, a large
difference between DTHPR and VAHPR means that the intermediate input of thisindustry brings in a relatively large portion of value-added from foreign countries.
As we have seen before, Japan’s difference between DTHPR and VAHPR in allindustry average is larger than America’s in both 1970 and 1990, but Japan’s difference
became closer during these 20 years, while America’s grew wider.
Also in each industry, in 1970 there are many industrial sectors where Japan’s
difference is wider compared to America’s. For example, Japanese DTHPR is larger
than its VAHPR by as much as 4 points in 1970 in almost all industrial sectors except8)Drugs & medicines and 9)Petroleum & coal products. We can also observe the sametendency in 1990.

Namely Japan keeps its high local contents rate only at “the last

step of the processing”
The difference between DTHPR and VAHPR in Japan’s main industries decreasedslightly in 1990.

This is because VAHPR did not change much during these 20 years

while DTHPR declined by a couple of points. However, taking into consideration thatthe level of production grew remarkably in this period, we can guess that the absolutevalue of value-added itself that leaked abroad was also huge accordingly. That is tosay, these figures can be interpreted to show that domestic production capacity
simultaneously advances with internationalization of production.
On the other hand, the situation in the United States is a little different.

There areonly 4 industries where DTHPR is larger than VAHPR by four points in 1972.

These

are 13) Non-ferrous metals, 14) Metal products, 20) Other transport equipment, and 21)
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Motor vehicles.

But, in 1990, the number of industries that falls in the same criterion

increased to 13.

They are, other than the above mentioned industries, 4)Textiles,

apparel & leather, 7)Industrial chemicals, 9)Petroleum & coal products, 10)Rubber &plastic products, 12)Iron & steel, 16)Office & computing machinery, 17)Electricalapparatus, nec., 18)Radio, TV & communication equipment, and 22)Aircraft.
Moreover, these differences have widened in contrast to the Japanese case.

It isinteresting to know that the rate of local contents of American input decreased in the
United States.

Because of this we can imagine that multi-national enterprises, which

are ruling the main industrial sections in the United States, advanced intra-corporate
division of labor by out-sourcing or further internationalization.

In other words, aknockdown method leaks a large part of value-added abroad because domestically it
does only the final assembling process, sometimes with a little intermediate processing,of parts and components imported through an intra-enterprise division of labor of
multinational enterprises.

It namely means a decrease of local contents in the UnitedStates and an increase of leakage of value-added abroad.

Especially in such sectors as16)Office & computing machinery and 21)Motor vehicles, the difference between
DTHPR and VAHPR is respectively widening 2.6 to 4.2 points (62% increase) and 4.2
to 6.5 points (54% increase) during the period of 1972 to 1990.

We may say that theAmerican economy has been caught in a trap which IBM and the Big-three automobile
companies brought about in completing their network of world production and sales.
6. Change in Home Production Rate and Rules of Origin
When we reconsider the discussion in the previous section taking into account the
recent international controversy on rules of origin, we recollect that this controversy
began with the increasing leakage of the American value-added to foreign countries6.
Therefore, we can say that estimating home production rate is almost the same as
describing a production structure in each period of each economy as its own base. The
reason we used the word “base” is that this report treats the domestic vs. foreign shareof "value" (more accurately value-added) that the national economy produced.

And

the result we obtained here shows a clear decreasing trend of home production rate forthe whole national economy.

Therefore, we can conclude that this result may indicate

an upgrading integration of production in contemporary capitalism and that it also

6 Some readers may remember when “the net cost method” in NAFTA was adopted

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第6章 A Comparative Study on Home Production Rate …

proves the process of economic globalization is set on a non-returnable track.
We think this result may also clarify that becoming anachronistic is a concept of“national economy” with a balanced reproduction structure or “world economy” as a setof self-concluding national economies (VAHPR has something to do with areproduction theory of primary input).

Indeed, there could be a possibility that inter-

enterprise division of labor, which is built in as the reproduction structure ofmultinational enterprises, would be harmful to the macro reproduction structure of anational economy.

Some researchers assert that an ideal type of national economy

should have a balanced and harmonious structure of reproduction, and that deviation or
distortion from that should be recognized as the ringleader of failure or as a difficulty
for the national economy.

But, it is not necessarily the case that economic

liberalization or internationalization should be regarded as a disturbance factor for a
reproduction structure.

We, therefore, think that the principle of national economy,

whether a nation state may be developing or advanced, should not be “independence”
but “autonomy”.

Autonomy in an era of globalization by multi-national capitalism

means that each national economy selectively absorbs the fruits of internationalizationaccording to its development stage and voluntarily adopts its policies based on theirapplicability to international circumstances.
However, some readers might recollect that the concept of “independent national
economy” was used in the almost same context as “enclave” or “autarky”.

Autarky

can enjoy neither economy of scale nor the economic effects given by international
division of labor or introduction of foreign capital and technology since autarky is
subject to an economy of small amount production with many varieties.

That is why

recently many researchers use a concept of surrounding areas (the middle between
center and periphery), and the World Bank as well as local governments tends topromote cooperation between multinational enterprises and governments of developing
countries. Moreover, we think that the fruit of a regional integration like ASEAN or
ASEAN Free Trade Aria (AFTA) was achieved by the renunciation of narrowmindedness that co-exists within the slogan: “independent national economy”.
7. Concluding remarks
We, in this report, have discussed such economic topics as home production rate,national economy, reproduction structure, and economic autonomy along with a natural
theoretical order.

Here, we would conclude this report by introducing an example
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where economic autonomy does away with the concept of “national economy”.

As iswell known, EC is presently in the process of market integration toward currency
unification.

The Maastricht Treaty required EU member countries to fulfill thefollowing four criteria by 1997 in order to join the European Monetary Union (EMU)71.

the achievement of a high degree of price stability: the average rate of inflation,observed over a period of one year before the examination, should not exceed bymore than 1.5 percentage points that of, at most, the three best performing
Member States in terms of price stability;2.

the sustainability of the government financial position : the government deficit
should not exceed 3% of gross domestic product (GDP) unless the ratio has
declined substantially and continuously and reached a level that comes close to3%, or alternatively, if the excess over 3% is only exceptional and temporary andthe ratio remains close to 3%. In addition, the public debt should not exceed 60%
of GDP, unless the ratio is sufficiently diminishing and approaching 60% at asatisfactory pace.

3.

the observance of the normal fluctuation margins provided for by the exchange
rate mechanism of the European Monetary System (EMS) for at least two years,
without severe tensions ;4.

the durability of convergence : the average nominal long-term interest rate,
observed over a period of one year before the examination, should not exceed bymore than 2 percentage points that of, at most, the three best performing Member
States in terms of price stability.

The countries that fulfilled the above conditions are the following 11 countries:
Germany, France, Italy, Spain, Netherlands, Belgium, Luxembourg, Portugal, Finland,
Austria, and Ireland.

On January 1 in 1999, they participated in EMU that is based on
8

the non-national and artificial currency EURO .

7 The URL of EU is http://europa.eu.int.

The condition to join the EMU is described in the section of "EURO".

8 Nikkei, February 28 in 1998. Afterwards, this change was finally approved in EU summit conferences on May 2.
As a result, a new market with a unified currency will be born and it will have a population of 300 million and a 6.9
trillion dollar GDP (in 1996). For reference, American population and GDP are respectively 260 million and 7.3
trillion dollars, while the Japanese counterparts are respectively 130 million and 4.6 trillion dollars. Among EU’s
15 countries, Britain and Denmark postponed their participation while Greece and Sweden were not able to satisfy
the Maastricht requirement. However, participation of these four countries is expected by the year 2002 whenEURO notes and coins start circulating. The exchange rates between EURO and currencies of non-EU countries
are equivalent to the present European Currency Unit (ECU). Therefore, member countries agreed that theexchange rate between EURO and each participant’s currency is fixed at the central price of exchange rate

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第6章 A Comparative Study on Home Production Rate …

This movement is none other than an example of harmonization in the managementof national economies, while formulation of EMU theoretically means a process of abreaking-up of national economies leading to regional unification throughstandardization of economic policy.

Taking this example in EU into consideration, we

might need to change our attitude that takes it for granted that an “economic model” hasits base in a nation state (or a certain kind of nationalism).

mechanism (ERM) as of January in 1999, i.e. 1 DM = 3.3538 FF = 990.002 IL. That is, as of April 1998,
1ECU=1.98 DM =145 yen =1.1 USD. Dutch banker Mr.Duisenberg, former president of the European Monetary
Institute and known as an inflation killer, was appointed to be the first president of the European Central Bank
(Nikkei, May 3 in 1998)

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