this is a big failing, i don't know exactly how morrowind treats you if you roll an argonian but i suspect the game isn't made too much harder/impossible---the devs are too cowardly to put class/race into a game in a way that actually effects the player. oblivion is more cosmopolitan & apparently peacefully presiding over a whole continent with equality so it kind of makes sense.

skyrim is especially bonkers---"skyrim for the nords!" why yes of course there are a dozen elf-owned businesses and farms in stormcloak territory, we don't want it to appear as if the racism regime is racist! not just from not wanting to constrain the player, i think they tried to make the segregation seem tame so the player wouldn't be impacted by what segregation actually is like (and think something ought to be done). yeah there's a ghetto associated with the dark elves but they can leave whenever they like, there's 3 sympathetic nords to 2-3 racist ones, dark elves aren't barred property ownership. it's just the aesthetic of racial oppression without any substance, god forbid we make a player think or feel something about racism