The shape, or rather misshape, of the American economy finds definition in the cluster of corporate mergers highlighted by the recent bid of Du Pont to take over Conoco. For the big deals occur in a part of the economy that thrives to the point of being relatively immune from high interest rates.
But there is another section of the economy -- featuring autos, housing and public services -- that is in the doldrums because of extreme sensitivity to high rates. The trick in national policy is to make the buoyant sector contribute to the revival of its lagging counterpart.
A list of the five biggest proposed, or consummated, mergers of the past two years shows where the action is. Apart from the Du Pont bid for Conoco, there was an unsuccessful move by Standard Oil of California to acquire Amax; a purchase of Belridge Oil by Shell Oil; a pending offer by Elf Aquitaine for Texasgulf Inc.; and the purchase of St. Joe Minerals by the Fluor Corp.
Mining or energy companies are the acquisition targets in each case, for obvious reasons. The mining companies -- Amax, Texasgulf and St. Joe Minerals -- have recently been under pressure from strong enforcement of environmental regulations by the Carter administration. But Jimmy Carter is out, and the enhanced defense program of the Reagan administration promises a boom market for metals. So the mining companies are attractive buys.
The stocks of energy companies have been depressed by the mini-glut of the past few months. But the general assumption is that Saudi Arabia will soon cut back production -- thus tightening supply. When that happens, the African producers will almost certainly push for a new surge in prices. So oil in the ground and gas and coal are again beginning to be worth more than dollars in the bank.
As to the purchasers, Standard of California, Shell and Elf Aquitaine are all international oil companies flush with big profits accumulated during the recent surge in prices. Fluor and Du Pont are established international corporations (one in heavy construction, and the other in chemicals) with an interest in diversification.
All five companies are not only filthy rich. They have almost unlimited access to credit, and they can afford to borrow even when the prime rate hovers around 20 percent. Du Pont, for example, borrowed $3 billion for the Conoco deal. Another oil company, which was also a potential bidder for Conoco, was reported to have borrowed $4 billion to $5 billion for the occasion.
The exact opposite condition, however, prevails in a large part of the American economy. Industries and activities allergic to high interest rates are suffering now. They are apt to suffer even more as the federal government and parts of the private sector enter the capital markets and bid up rates.
The auto industry, which sells most of its cars on credit, represents the most obvious example. The latest figures show that sales for the domestic industry during the last week of June dipped to a 23-year low. And, of course, what hits car sales also hurts the steel, glass and rubber industries.
Housing, because of the prohibitive mortgage rates, is also flat. Prices are softening in prime markets, and builders all over the country find themselves unable to sell new homes. The savings and loan associations, obliged to pay high interest rates for deposits now and receiving only low returns on old mortgages, are breathing particularly hard. To keep them alive, congressional committees have added to the tax bill -- and the administration seems ready to accept -- a giveaway concession, the All-Savers Certificate, which provides for a government guarantee of tax-exempt loans at more than 10 percent interest.
Local institutions of government -- states, cities and various boards responsible for schools, transportation and other functions -- constitute probably the weakest segment of the economy. They will suffer big cuts in federal payments when the 1982 budget is approved by Congress. They have to complete in the capital markets with the federal government, the richest private companies and the weaker companies fortified by federal guarantees. In the Great Lakes states, where autos and other ailing industries predominate, and where there are few thriving energy- or defense-oriented companies to tax, the shock is apt to be especially hard. Some cities and some school and transit systems could go bust.
So there is a kind of lopsided economy in the country. The sector insulated against high interest rates thrives. The sector sensitive to high rates verges on collapse. While that imbalance persists, it is hard to call the economy healthy.