The official version of this article is published in the Fall 2013 edition of South Atlantic Quarterly here.
Years after Thomas Jefferson’s famous words “all men are created equal” began to ring as a call to conscience, he himself must have felt every bit of their hollowness. Polish Revolutionary War hero Thaddeus Kosciuszko bequeathed Jefferson enough money to free his slaves, as well as to set them off with land and farming equipment of their own, but Jefferson refused this gift. Instead, he died with a debt hanging over Monticello — a kind of debt that he was the first to incur through monetizing his slaves for use as collateral for the loan to build his estate (Weincek 2012: 96). The slave families, who resided on Jefferson’s estate as intact families, were separated and sold to pay the outstanding debt such that the estate could be passed down to its rightful heir. In spite of words we have no reason not to believe were heartfelt, and in spite of fathering six black children, Jefferson was not able to rise to the call of his words in the end, leaving as mixed a legacy as the American history that has followed. And in spite of generations of black descendants, no reparation has ever been paid to them; they remain a forgotten part of this legacy. As the story is most commonly told, there is only mention made to a legitimate debt paid with the bodies, blood and breath of Jefferson slaves, but no mention of any owing to them. Unfortunately, this telling of Jefferson’s story not only exposes the power dynamics of the past, but also discloses a fundamental understanding of the world that continues to rear its ugly head today.
During Jefferson’s life, Wall Street was already expanding on and experimenting with the monetization of human life through debt. In 1804, well before the battle for abolition was won here in America, but only after a bloody 13-year struggle, Haitian slaves liberated themselves by successfully defeating Napoleon. President Jefferson was the first to refuse to recognize their independence from France. As a result, over twenty years later, the French reminded the Haitians that they, themselves, constituted a debt. The Haitians did the only thing they could to retain their physical freedom and borrowed the equivalent of $150 million dollars (almost double the cost of Louisiana) from Wall Street to pay “reparations” to the French. Of course, this original predatory debt reaped enormous rewards and in the end they paid the equivalent of $20 billion dollars for their freedom — something that never should have been for sale. And all the way up until 1947, 80% of Haiti’s economy went to pay off this debt to National City Bank — known today as Citibank. Of course, the price of freedom was unrelenting poverty, the permanent loss of opportunity to develop infrastructure, and the seemingly never-ending suffering in enslavement of another form.
Yet, when we talk about debt, mostly we talk about it as a thing — as the kind of thing that hangs from the body like a ball and chain or from our necks like an albatross. We talk a lot about how debt makes us feel: atomized, isolated, alone. But, we don’t often talk about how the neoliberal construct of perpetual indebtedness to non-human financial entities has created a populous so focused on debts “owed” to Wall Street that we have no collective memory of any other kinds of debts. But, once we open Pandora’s box to take a look at the intersections of debt and race, we are forced to ask ourselves how it is that we have forgotten so much. Could it be that the alongside the rise of the neoliberal social order characterized by the isolation of the invisible chains of debt, a parallel practice of “colorblindness” arose that produces the invisibility of race? And if Malcolm X was correct that we “cannot have capitalism without racism,” we have to ask ourselves whether racism has really declined with colorblindness, or whether colorblindness might be neoliberalism’s corollary. It has been under a gray monotone cloud that a predatory debt system has been advanced, one that striped African-Americans of all economic gains subsequent to Civil Rights, and that spread throughout the rest of the economy, impacting generations to come.
There’s plenty of evidence of racism in spite of all the talk about post-racial America. Still, it comes as a big surprise that while we have been declaring race dead, structural racism has clearly increased. In fact 50 years after Civil Rights, 150 years after the Emancipation Proclamation, and during the first black presidency, white Americans currently hold at least 19 times the wealth of African-Americans (Kochhar 2010: 3). Put into perspective, in 1984 the ratio was 12 to 1, dipping to 7 to 1 in 1995, jumping to an astonishing 19 to 1 in 2009, and is probably even greater now. In practical terms this means that the average middle income black family has less wealth than the average white family with earnings below the poverty line (Shapiro 2004: 7). According to a 2010 Brandeis University study, in the last 23 years, the racial wealth gap increased by 75K from 20K to 95K (Shapiro 2010: 2). Even within the highest income African Americans, wealth has fallen from 25K to 18K, whereas the wealth of whites in a similar class surged to 240K (Shapiro 2010: 2). White families saw a dramatic growth of financial assets excluding home value from 22K to 100K, while African Americans saw very little increase at all (Shapiro 2010: 1). Because family wealth is the biggest predictor of personal wealth, and wealth is used to pay for education, this gap assures racial inequality for at least the next generation. Already 81% of African American students are graduating from college an average of 29K in the hole (Johnson, 2012: 21). And already the average middle income African American worker would have to spend an additional twelve weeks per year working to earn the same amount as a white worker (Shapiro 2004: 7). As a result, between 1984 and 2007 African Americans actually doubled their debt burden as measured by assets against liabilities. At the rate blacks have been falling behind since the mid 90s, black and white median wealth will never ever reach parity, and unless something is done, these paths will continue to diverge.
Yet, 61% of white Americans believe that blacks have already achieved equality, and an additional 22% believe that racial equality will be reached “soon” (Richomme, 2012: 8). In other words, 83% of whites believe that we are living in a post racial era. Only 17% of blacks believe that equality has been reached. If we understand the neoliberal debt system as increasing inequality by moving financial resources toward the top, this process would be visible if it were not for the invisibility of race and the ideologies of colorblindness that accomplish that invisibility. Bonilla-Silva proposes four central frameworks that colorblindness operates through: abstract liberalism, naturalization, cultural racism and minimization of racism. Vaguely liberal ideals of freedom manifest as the belief that opportunities should be equal, but not intentionally expanded, tying right into the idea that things are just the way they are. The “it is what it is” approach lends to beliefs that poverty is cultural, and if people changed their habits they would advance. And, of course, this goes hand in hand with the idea that blacks do not experience discrimination, a belief with which 83% of whites agree. According to Bonilla-Silva “together these frames form an impregnable yet elastic wall that barricades whites from the United States’ racial reality (Bonilla-Silva, 2010: 47).”
These frames are drawn upon synergistically and effortlessly such that it makes sense that inequalities exist, and that it also makes sense that nothing proactive can or should be done about it. Part of the way that these beliefs work effectively together is that they inhabit the invisible space that debt creates between us, presenting us as if we are not only disconnected from each other but from time, and thus history. As indebtedness to financial powers requires of us constant foresight, a constant seeking of a future beyond debt, we lose sight of the past. Colorblindness serves the invisible debt economy like a key in a lock. By rendering the debts that have created the structures of inequality invisible, we reinforce the social dynamics of neoliberalism’s formulation of debt. And while the dominant belief is that the debts we owe are generic and disconnected from the past, colorblind practices amount to a willful denial and lack of concern with the reality of worsening racial inequality. Worse yet, by assuming that the playing field is truly even, colorblindness tends toward blaming the victim. After all, if it were not simply inherent deficit, why else would blacks be lagging so far behind?
These ways of seeing manifest as increasing indebtedness and a predatory debt based economy for all, as wealth-extracting products are first tested on and then expanded out from black and other communities of color. When it comes to credit cards and real estate, we can see how these frames led to a domino effect to the detriment of not only blacks, but to white Americans as well. Beginning in the 1980s household debt began to rise significantly, increasing every single year from 1982 to 2007 with total household debt hitting 13.9 trillion in 2008 (Ruben 2009:1). From 1989 to 2001 credit card debt literally tripled for the average American family who experienced a 53% increase in debt load (Draut 2003: 9). And since 2000 families began to increase debt at a pace four times faster than in the 1990s (Weller 2007: 54). But what is more shocking than this enormous increase is that lower income families had a 184% increase in debt (Draut 2003: 21). While debt levels have increased fastest for middle income families, low to moderate income families suffer more. As of 2004, 46% of very low income families earning less than 10K per year spent more than 40% of their income to pay off their debt (Ruben 2009: 9). Much of this increase in debt can be traced to the 1978 Marquette vs. First Omaha Service Corp Supreme Court case that had the practical effect of ending laws prohibiting usury. By allowing states to regulate interest rates and credit card issuers to set interest rates by the home state of their corporate operation, banks were able to avoid state caps on interest rates. As a result, banks were able to market high interest, high fee predatory credit products targeting lower and moderate income people who could not obtain credit easily before. Since over 25% of African Americans live below the poverty line, and since African Americans earn on average 62% of white Americans, blacks were disproportionately impacted by these predatory tactics. And because of the structural inequalities that have manifested as long term credit famine in communities of color, these products were viewed as lifelines. But these predatory products expanded rapidly. Credit card companies tested new ways to make greater profits through strategies like resetting interest rates due to missed payments and charging exorbitant late fees, and began to include these terms with less risky products.
Because the predominant underlying colorblind assumptions have been that a culture of financial illiteracy or class based lower credit rating, these products were allowed to take hold in ways they would not have been allowed to had racism been considered a possibility. A study conducted by Ethan Cohen-Cole of the Federal Reserve Bank of Boston demonstrates that racial bias is a factor in the amount of credit offered even when other possible factors are eliminated. The study shows that the same individual in an 80% white area would receive about $7000 more dollars in credit than an individual living in an 80% black area (Cohen-Cole 2009: 14). And a 1% increase in the percentage of blacks in an area corresponds to a $117 dollar reduction in credit (Cohen-Cole 2009: 14). Further, even high quality credit individuals receive less credit if they simply live near a payday lender. Because available credit corresponds to credit score, the reduction of available credit automatically means that credit scores are stratified racially. Therefore, it’s typical for African-American borrowers with equal credentials to have a lower credit scores simple by virtue of where they live. This impacts both the available credit products, insurance rates and also may impact employment, as 60% of employers now use credit score in hiring decisions. Of course, this also means that predatory credit products like payday and auto title loans are frequently the only available products for even higher quality borrowers. In essence, this is a combination strategy of first redlining to offer less credit and then reverse redlining to offer subprime and high risk products. Because colorblindness normalizes racial disparity as related to class or culture, and minimizes the possibility of racism, a cloak of invisibility hides the reality of the economic hate crime being committed. Rather than being polite and innocuous, colorblindness is really a dangerous new form of racism that grants neoliberalism’s wealth moving tactics momentum and power.
Of course, predatory creditors did not stop with credit cards. Between 1993 and 2000 mortgage companies specializing in subprime loans increased their share of mortgage originations from 1 percent to 13 percent. By 2001, prime loans were only 71% of refinance loans for blacks with income over 120% of their area median in predominantly black neighborhoods, whereas 83% of loans were prime for lower income white borrowers living in lower income white neighborhoods (Apgar 2005: 2). So, after communities became predominantly black through white flight, blockbusting and steering, and after starving communities of credit by which a racially stratified credit scoring system developed, banks then targeted previously redlined communities with predatory subprime loans. The targeting process included attracting black ministers to influence their parishioners with kickbacks, informing high credit score customers that they would be better off putting no money down, pushing through stated income paperwork although a W-2 was available, and saturating whole communities with mortgage brokers trained to target them with bad deals that generated the highest brokerage fees. By targeting communities of color with loans that were designed to fail, banks had discovered a new way of depleting financial resources from these communities. The President of the National Black Chamber of Commerce sites subprime as the largest hate crime in history and reports that it will take two generations for African-Americans to recover the lost wealth. Subprime represented an enormous change in the mortgage market with originations increasing from $35 billion in 1994 to $332 billion in 2003 (Apgar 2005: 8). A key aspect of this growth was that it was not only about nabbing first time borrowers, who may have qualified for prime loans, but also about preying on homeowners looking to improve their properties or withdraw equity from their homes by refinancing.
Much of the conversation around subprime lending has weighed whether race was really a factor, or whether it was just a culture of financial illiteracy related to socioeconomic class. In New York City only 24% of white borrowers earning 125-150K took out subprime compared to 52% of Hispanics and 63% of blacks. And for those earning even more the numbers really start to tell the story: in the 150-250K income bracket, only 20% of whites, but 50% of Hispanic and 62% blacks took out subprime mortgages. In order to believe that race was not a factor in how these loans spread, ironically, one would have to believe that race was a factor in financial literacy. However, according to the Cohen-Cole study, there is simply no evidence that greater financial knowledge was a factor (Cohen-Cole 2009: 17). In other words, colorblindness just hides the bias lurking in its shadow, and in doing so, the only appropriate way of rectifying the impact of fraudulent lending practices on racial inequality is rejected. As early as 2003, an article in the Toledo Law Review looked to categorize the lending practices that led to this catastrophe as an “economic hate crime.” The paper argues that “racialized predatory lending” is a “distinct variety of abusive lending that is significantly different from other non-racialized financial exploitation (Hunt 2003: 2).” Furthermore, the “significance of this difference lies in the deep historical stain of racial subordination in America and the contemporary legacy of that history in creating and perpetuating both institutional and cognitive racialized barriers to accessing capital, credit and property (Hunt 2003: 2-3).” The paper argues that the legal tools to combat this particular form of predatory lending are not up to the job, because they dehistoricize the problem and consequences of “equity theft,” and simultaneously eradicate race as a consideration in contemporary lending practices. Unfortunately, the future looking cognitive status of the debtor society in combination with colorblindness makes a Janus-based approach impossible.
As a result, this hate crime spread rapidly with 58.5% of blacks receiving high cost loans, versus 15.9% white and 45.5% Hispanics according to the Department of Housing Preservation and Development (Fernandez 2007: 4). Unlike white Americans who benefited from housing expansion programs such as the New Deal and Veterans Administration Loans, African Americans had only begun to enter the housing market, as a result many of the early mortgages were just coming to term. Since a home is commonly viewed as a primary asset, blacks did not have many other assets. So, when housing losses are excluded, black and Hispanic families would have only suffered losses of $626 and $479 respectively during the crisis (Kochhar 2011: 15). Furthermore, if predatory home loans had been distributed equitably, whites would have sustained 45% greater losses, and blacks would have sustained 24% fewer loses (Rivera 2008:17). This is where the colorblind, level playing field myth really goes awry. In spite of pre-existing disparity, changes in tax policy that promoted wealth for those who needed it least, the stagnation of income that halted generational improvement, African Americans were striving and making economic progress until predatory housing debt wiped it all out. Predatory racist lending patterns literally stripped future generations of black Americans of inherited wealth. The combination of privilege and bias resulted in a disaster for African Americans, who are now locked in an economic bind that produces the need for more and more debt. But, in the end, the rapid depreciation of housing nationally due to predatory equity theft tactics impacted white Americans in far greater numbers. If it were not for a commitment to colorblindness, the debt practices that fueled the 2008 financial crisis could never have taken hold. Legal remedies could have been sought that prevented and restored stolen equity, and banks would simply not have been able to expand their practices. Colorblind ideologies naturalized racial inequality, allowed the process of predatory lending to be understood as class based, and made it acceptable to turn a blind eye to the economic attack on communities of color, while neoliberalism’s debt economy prospered.
The reparations movement ended in September of 2001, only days before 9/11. By the end of the United Nations’ World Conference Against Racism, Racial Discrimination, Xenophobia and Related Intolerance in Durban, South Africa in 2001, the word “reparation” had been removed from the final declaration, and it had been decided that transatlantic slavery could not be referred to as a “crime against humanity.” This was the exchange that had to be made for European support of the New African Initiative plan, a primary pillar of which was debt relief. The same capitalist powers that determined the laws that allowed their nations prosper from slavery were the ones to determine the language of the 2001 declaration, language that closed the door on claims for reparations. Yet, when we talk about debt as a focal point for a political movement, it seems impossible to exclude a history that is at the root of current debt practices, and that has led to a global system of exploitation that undergirds strategies for shifting economic resources to the financial elite. As a debt resistance movement grows internationally, it will need to look at debt not just from the neoliberal perspective of debts we owe financial entities, but to broaden that perspective to a more historical analysis of how current inequalities are fueled by debts of other kinds. Without a critique of the intersections of race and debt, it seems unlikely that the solidarity needed for a global political movement could develop. And this is where, if colorblindness is neoliberalism’s corollary, it will have to be challenged with a demand to see. Only after the cracks where debt hides are illuminated, will we be able to see what truly radical demands might be.
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