Above photo: Boys being provided with wine at a wine farm at Muldersvlei around 1950 . Bryan Heseltine collection from Pitt Rivers Museum.
America’s financial overlords are hooked on a subprime lending model that preys on the poor.
And now this unsustainable system is crashing down.
Among the most exploited South Africans during 48 years of white minority misrule were the vineyard workers who were often paid with daily rations of wine to supplement their pitiful wages. Known as the “dop”—Afrikaans slang for “drink”—the practice was outlawed in 1960, but it was only after voters of all races went to the polls to abolish apartheid 34 years later that the Black majority government began to enforce the ban.
In late 2000, I went to South Africa’s wine-growing region in the Western Cape to interview a white attorney who had recently purchased a vineyard in the hopes of fulfilling his lifelong dream of producing award-winning wines. He was a progressive who believed it his patriotic obligation to treat his Black employees fairly in a new, democratic South Africa. But he was motivated by more than altruism; mass-producing a quality product required a sober, healthy workforce. It simply made good business sense to pay his employees a living wage.
What he had not anticipated, however, was the response of some of his employees when he gathered them together to announce that he was their new boss and had decided to raise their pay. When he informed them that he was ending the dop, however, seven of the 15 farm workers walked off in disgust, never to return.
“They had grown so accustomed to receiving part of their pay in wine that it seemed perfectly normal to them,” the attorney told me. “That some of them were sick and even dying was of no importance to them. They simply could not imagine life without the dop.”
That also characterizes perfectly the overlords of America’s system of racial capitalism, who are addicted to an unsustainable economic model that squeezes poor people—disproportionately Black—out of more and more money. That strategy produces windfall profits in the short term, but it is inevitably followed by a debilitating hangover, tremors, cirrhosis of the liver and ultimately death.
Emblematic of America’s dop are recent news reports that show the percentage of subprime borrowers who are at least 60 days behind on their auto loans rose to 6.65 percent in October, the highest level on record, according to Fitch Ratings, a credit research agency. Lenders today are repossessing cars at the highest rate in 16 years.
So critical are automobiles to American life that car payments are, along with mortgage payments, among the last remittances that Americans are willing to miss. That has economists and other financial analysts worried, and invites stark comparisons to the Great Recession in 2008 and 2009, when another asset bubble, the subprime real estate market, burst, nearly swallowing the global economy whole.
Ray Shefska, the founder of CarEdge, a consulting firm for automobile buyers and sellers, told News Nation last month :
“We are seeing signs that the difficulty that many Americans are having in making their car payments is a growing and troubling sign. Uh so yes, I think as we continue to see repossessions move forward and go up, you have to also consider that many of the large banks out there, the lenders are actually increasing their loan loss provisions because they don’t expect the loans that they wrote in the past to perform at the level that they thought they would. And in many cases, they’re actually delaying the repossessions by trying to work with the customers to extend their loan terms…offer a couple of months abatement on payments. So, yeah, the repossession issue is a real concern at the moment.”
With the Obama administration’s policies that encouraged—rather than discouraged—asset bubbles, investors continued to scour the marketplace, seeking opportunities to exploit workers in a post-industrial economy that increasingly relies on speculation to turn a profit. The subprime auto market more than doubled in size following the Great Recession.
Similar to the subprime mortgage market, subprime auto loans charge interest rates of as high as 25 percent—more than triple the prime rate– to borrowers with credit scores below 670. And, redolent of subprime mortgages, studies suggest that African and American and Latinos are more than twice as likely to be saddled with high-interest car loans as are whites.
Some portion of that disparity results from historical discrimination in the real estate, banking and employment markets which have left African Americans unable to accumulate as much wealth as whites through homeownership. But that is only part of the story. Just as Black households earning $300,000 annually were more likely to be saddled with a subprime mortgage than a white family earning $30,000 a year, racial discrimination in the automobile market is pervasive as well. In a 2022 paper, Emily Hirtle, a policy associate for Americans for Financial Reform wrote:
“Racism flourishes in the subprime auto market as well – as of 2016, at least eight banks had been accused of increasing interest rates for Black and Latinx borrowers. As Senator Elizabeth Warren remarked in a 2015 speech: ‘The [auto] market is now thick with loose underwriting standards, predatory and discriminatory lending practices, and increasing repossessions.’”
Among advocates for a sustainable economy, the consensus is that the U.S. squandered an opportunity to reinvent itself by focusing on alternatives to fossil fuels, and restoring the consumer buying power that was the key to economic growth in the postwar era. Having shipped its once robust manufacturing sector overseas, the U.S. no longer makes anything of value, leaving the economy stuck in boom-bust cycles, with each downturn worse than the last.
That is especially troubling considering that the Great Recession was the worst financial crisis since the Great Depression. And there are signs everywhere that the 2008 downturn is repeating itself.
In September, Tricolor, a Dallas used-car dealership specializing in subprime auto loans to Latinos, suddenly filed for bankruptcy protections, leading many financial analysts to compare it to the 2008 collapse of Lehman Brothers. Much like the South African farmworkers who were invested in the dop, Wall Street’s investment in consumer debt does not bode well for the nation.
In a recent social media post, one writer mused:
“With apologies to Mark Twain, I don’t think it much matters whether history repeats or rhymes. Loansharking is not a sustainable business model. This country is screwed.”
Jon Jeter is a former foreign correspondent for the Washington Post. He is the author of Flat Broke in the Free Market: How Globalization Fleeced Working People and the co-author of A Day Late and a Dollar Short: Dark Days and Bright Nights in Obama’s Postracial America. His work can be found on Patreon as well as Black Republic Media.
