Auto Debt Rises as US Workers are Strangled by Moneylenders

Richard Mellor

Afscme Local 444, retired

Member DSA

I have written on more than one occasion that the first victim of US capitalism is the US working class. The US capitalist class is at war on many fronts, but its longest and most concerted war is against the US worker. This war never stops.

The capitalist mass media reminds us daily of the housing crisis, the opioid crisis, the health care crisis and so on. Suicides are continuing to climb with the suicide rate increasing 30% between 2000 and 2016, and were the 10^th leading cause of death in the United States in 2016. Source. And we kill each other at alarming rates. Almost daily we read of people wiping out their entire families, children, relatives, wives and loved ones. Mass shootings in schools, clubs, mall’s churches and other places where people congregate are commonplace to the point that we are not surprised by them anymore.

How can this be when we are so happy here and the US such a wonderful place to live?

The reality is that there is a major crisis that is always left out that consumes us daily, a crisis that has a debilitating effect on society and mass consciousness. This crisis is never mentioned, and it is at the root of this mass sickness we are experiencing in the US. This is the capitalist crisis.  The capitalist mass media is a part of the problem, and a major contributor to the sickness, isolation and alienation that overwhelms us because it covers for the cause. Its purpose is to obscure the very idea that there is such a thing as capitalism, or that we live in a “system” of production at all.  We are preyed on like no other country on earth. We live in a 24-hour market place as they trick, con, coerce us in to buying things we are told we must have to live a happy and fulfilling existence and they will lend us the money (at a hefty fee of course) to buy them. The US ruling class is the most successful propaganda outfit there is.

We are the first victims of the savagery of the so-called free market yet this is never talked about in a serious way. If it is mentioned it is to drive home the idea that capitalism is permanent, it is the end of civilization as Francis Fukuyama claimed. There is no alternative or TINA as Margaret Thatcher put it. But, and this is particularly so in the US as we are in the belly of the beast here, we are in debt bondage. There is chattel slavery, wage slavery and with wage slavery comes debt bondage.  In the US, the moneylender rules and rules with a vengeance, extracting far more than their pound of flesh.  Americans borrow money to eat, to get their teeth fixed, to get basic medical attention and more. Debt and the misery, insecurity and helplessness that accompanies it is about to bring the house down again and it is debt that lies behind much of the social crisis, family breakups, drug addiction, violence, and so on.

American middle class buyers can’t afford a middle-class lifestyle.

WSJ

US household debt is close to $14 trillion and $869 billion higher than 2008’s $12.68 trillion peak.  With very limited mass transit in the US, Auto loans are an increasing portion of this debt, $584 billion in new auto loans and leases in 2018.

This absence of a mass transit network compared to Europe for example, means the car is king and a symbol of freedom in the US. Billions is spent on media campaigns convincing us of this. It is even stronger in the western US and, like every other commodity, the investors on Wall Street, the moneylenders that buy packages of loans, will lend us the money to purchase the auto’s we need to get to work. No doubt many of the same people invest in the production of autos as well, it is no wonder mass transit is off the table for them.

The car is the symbol of freedom like owning a house which you may well do by the time your 65 and you’ve paid all the interest of the loan up front. The concept of living in social housing is for losers, you’ve failed. This the stigma associated with social housing in the US.

The Wall Street Journal points out that almost one third of auto loans taken in the first half of 2019 “…..had terms of longer than six years……” , and by the end of June US consumers held $1.3 trillion of debt linked to their autos. The US consumer is so tapped out, so overwhelmed with debt that loans as high as 8 years are on the books as the size of the average car loan has increased by one third in the last ten years. The moneylenders have “added months” to loans to keep “payments manageable”.

This present situation is untenable and cannot continue much longer without a severe correction, a deep recession or slump. Imagine this. Ten years ago, auto financing  brought in $516 per car and the dealers made $837 on the sale. In 2019 so far, the WSJ points out, “….dealerships made an average of $982 per new vehicle on finance and insurance versus $381 on the actual sale.” Moneylending pays.

When we take all of this in to consideration and then we sit in traffic jams for up to four hours a day in some cases, it appears the auto is far from the symbol of freedom they claim it is. It is a huge burden on individuals, society and the environment.

The stress caused by debt, trying to pay it, failing to pay it and so on, contributes to the mental pain and at times breakdown of the individual and wider society. As in all aspects of our society the poor and lower income are preyed on more aggressively and the cost of failure is severe. There are subprime lenders in auto also.

 

Moneylender Don Hankey's home in Malibu.

One such lender, Westlake, is owned by a former care dealer Don Hankey. Hankey is worth $3 billion and has his grubby little hands in various parasitic ventures including real estate, auto insurance as well as moneylending.  The Journal describes working conditions at Westlake:

“Much like a dealership, the company is obsessed with results. An automated system sends emails to employees with an image of a winking robot when they are late to work, unproductive or exceed expectations.”

Being unproductive in the moneylending business means not getting people to borrow no matter what it takes. When the victim is late in paying they can expect a call from a Westlake employee and 40% of Westlake’s employees focus exclusively on collecting the WSJ says. The Journal describes the interaction between a representative of Westlake and the victim:
 

“The Westlake representative switched between English and Spanish. He offered an extension on the March payment, meaning it wouldn’t be due until the end of the loan in 2024. But he collected nearly $600 on a partial payment for April over the phone. Borrowers are less likely to resume payments if they stop altogether.

After hanging up, the representative rang a bell at his desk. “35K,” he called out, referring to the balance of the loan that was no longer considered seriously delinquent. ‘It took a while but I got ’em.’”

Both the caller and the victim will be suffering from this disease called the free market. The caller is de-humanized as the powerful tendency for compassion and human solidarity that is in us all has to be suppressed to do that job efficiently. The US drone operators expressed feeling that way in their open letter to Obama about their activity killing people they knew nothing about except being told by their government they were terrorists.

The borrower, or victim works more overtime, longer hours, more time away from family friends and reduced leisure time as a result. His or her quality of life deteriorates in order to pay the moneylender for years. “Even just signing the paper, not even driving the car off the lot, suddenly I’m underwater,” one buyer says looking at paying one quarter of his take home salary for a car.

This is just one small example of the inhuman affects of capitalism. When a flower wilts do we not consider the soil it is in? If the fishes die in our aquarium do we not check the water? So we need to free ourselves from the mind numbing propaganda and recognize that the individual cannot be separated for the society in which we live.

There is another issue in this tale and that is the role of debt in capitalist society.  In a capitalist mode of production workers produce too much, produce more than we can buy back. Marx explained this some 180 years ago. At some point the system grinds to a halt in a recession or slump and madness ensues as value in the form of productive forces is destroyed, workers thrown on the streets. Debt puts off this crisis, delays it, but at some point the system, like an elastic band has to snap back to reality.  In the meantime, the social and individual consequences of debt leads to all sorts of social crises.

In terms of the auto, it is painfully obvious that mass transit, publicly owned, managed and controlled is the answer. Social necessities from transportation to energy, health care, housing and what I have been taught to call the commanding heights of an economy, cannot be in private hands. The auto is a very inefficient means of transportation though, as we can see, a very profitable one for some.

We can see that the workers in auto have tremendous potential power as so many jobs are linked to this industry. Then there is transportation and the docks and the airlines and the public utilities that are still pretty much all organized and the tremendous and game changing teachers and educators movement that shocked the labor hierarchy and many union activists on the left who would never have predicted them.

Despite the decline in union density organized labor can bring this economy to a halt. But this terrifies the labor hierarchy who seek organized retreats or a few mild and generally temporary improvements for members in isolated disputes. In the crane operators strike in Western Washington the labor officialdom introduced draconian picket line rules that ensured that the dispute stayed within the confines of acceptable behavior, acceptable to the bosses and the Democratic Party and didn’t influence other workers or break out in to a more generalized class conflict. 

This crisis of debt in auto and the solution of mass transit is something that could be taken up by the UAW leadership in the present strike. There is a strong hatred for the bankers, Wall Street and the money crazed individuals who brought us the last crash and who have amassed huge fortunes as the living standards of US workers and the middle class decline. But the UAW leadership just like the leaders of the IUOE in the crane strike, do not want to raise expectations or mobilize the potential power of organized labor which would galvanized the millions of unorganized workers in the US as well as union members weary of defeats.

For the trade union officialdom, a move like that can only lead to chaos. It will take a mass movement from below to dislodge the present leadership of the 14 million member trade union movement. But that will come.

The Wall Street Journal article on the auto debt is here.