From the Moral Limits of Markets to the Moral Limits of Welfare

Abstract

The political philosopher Michael Sandel (2012) has recently argued compellingly for more attention to the moral limits of markets, arguing that market values can crowd out other values we should care about. Meanwhile, conservative advocates for welfare reform, such as the Australian Aboriginal leader Noel Pearson, have raised concerns about the impact of long-term welfare receipt on community values. Pearson's argument about welfare can be articulated in similar terms to Sandel's argument about markets. Pearson maintains that in heavily disadvantaged communities – such as the Aboriginal communities of Cape York Peninsula – the state's provision of non-contributory welfare can crowd out important values such as trust, respect, care for the weak and mutual help as well as self-reliance and hard work. Though Sandel's and Pearson's arguments find receptive audiences on different ends of the political spectrum, the parallels between their arguments are striking. The article seeks to promote greater scholarly engagement with Pearson's moral critique of welfare while expressing scepticism about one of the key correctives he proposes.

Full text

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From the Moral Limits of Markets to the Moral Limits of Welfare
By Katherine Curchin, Australian National University
This is a post-peer-review, pre-copy edited version of an article published in the Journal of Social
Policy. The definitive publisher-authenticated version is available online at:
https://www.cambridge.org/core/journals/journal-of-social-
policy/article/from-the-moral-limits-of-markets-to-the-moral-limits-of-
welfare/1E33AF1EEAD1385D157DAE7FA7A773A3
Abstract
The political philosopher Michael Sandel (2011) has recently argued compellingly for more attention
to the moral limits of markets, arguing that market values can crowd out other values we should
care about. Meanwhile, conservative advocates for welfare reform, such as the Australian Aboriginal
leader Noel Pearson, have raised concerns about the impact of long-term welfare receipt on
community values. Pearson’s argument about welfare can be articulated in similar terms to Sandel’s
argument about markets. Pearson maintains that in heavily disadvantaged communities – such as
the Aboriginal communities of Cape York peninsula - the state’s provision of non-contributory
welfare can crowd out important values such as trust, respect, care for the weak and mutual help as
well as self-reliance and hard work. Though Sandel’s and Pearson’s arguments find receptive
audiences on different ends of the political spectrum, the parallels between their arguments are
striking. The article seeks to promote greater scholarly engagement with Pearson’s moral critique of
welfare while expressing scepticism about one of the key correctives he proposes.
Key words
Noel Pearson; Michael Sandel; markets; welfare reform; Aboriginal Australians
Acknowledgements
Funding for this research was provided by the Australian Research Council. The author would like to
thank Will Sanders, Tim Rowse, Matthew Gray, Nicholas Biddle and Rob Bray for helpful comments
on earlier drafts of this paper and is grateful to three anonymous reviewers for their constructive
suggestions.

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From the Moral Limits of Markets to the Moral Limits of Welfare
Introduction
The Australian Aboriginal public intellectual and social reformer Noel Pearson has had a singular
impact on the social policy landscape in Australia this century. His provocative analysis of the social
crisis facing some remote Aboriginal Australian communities represents a major contribution to the
global understanding of the difficulties socially excluded Indigenous populations pose for the social
policies of liberal-democratic welfare states. In 2000 Pearson published a manifesto, ‘Our Right to
Take Responsibility’, which contains a scathing critique of the impact in Queensland’s Cape York
Peninsula, his home region, of the extension of welfare entitlements to Aboriginal people (Pearson,
2000). In that work, and essays and lectures published since, he has argued that two generations of
unconditional cash welfare transfers for working aged people in Cape York have ‘produced a social
disaster’ (Pearson, 2009a: 188), characterized by violence, low rates of educational attainment,
overrepresentation in the criminal justice system, ill health, and early death (Pearson, 2000: 15).
Though Pearson believes that high rates of alcohol and drug abuse are also causally important
(Pearson 2000, 24), he contends that ‘the nature and scale of our current social problems are
critically connected’ to the communities’ pervasive dependence on welfare payments (Pearson
2000, 25).
Elements of Pearson’s political thought have encouraged some observers to label him ‘neoliberal’
and to dismiss his moral concerns about long-term welfare dependency. This article encourages
readers to engage with the possibility that under certain circumstances well-intended social policies
can have demoralizing effects on populations culturally and geographically distant from labour
markets, such as indigenous peoples. At the same time it argues for a rethinking of Australia’s
current policy response to this problem. The impact of Pearson’s intervention into public debate
about social policy has largely been to bolster the existing trend of reducing the autonomy of
welfare recipients, especially Indigenous Australian welfare recipients. The Australian government
has increasingly made welfare payments conditional on certain desired behaviours, and restricted
the way payments can be spent (Bielefeld 2012). This article argues that this neopaternalistic
response to the moral limits of welfare is ill-advised. Properly understood, Pearson’s moral analysis
of welfare as an economic institution suggests that what is needed is not punitive treatment of
individual welfare recipients so much as greater investment in economic opportunities for residents
of disadvantaged regions. Pearson’s greatest contribution is to shows us the inadequacy of a welfare
state that maintains some citizens in the face of a breakdown in their access to a functioning labour
market, while doing little to rectify this breakdown.
Concerns that institutionalised rights to poverty relief have corrupting effects on morality have a
long history (Tocqueville 1983 [1835]). Thomas Malthus (1999[1798]) argued that the poor laws had
the perverse effect of increasing the misery of the poor because they encouraged irresponsibility. In
nineteenth century England fears that the availability of poor relief induced idleness among those
capable of supporting themselves led to the development of the principle of less eligibility, whereby
the position of those depending on poor relief was made less desirable than the position of the
poorest laborer (Englander 2013: 11-12). The principle of less eligibility continued to influence the
development of social policy in Britain in the early decades of the twentieth century (Thane 1978).
The fear of developing a pauper class made the governments of the Australian colonies in the
nineteenth century reluctant to provide outdoor relief (jahoda1973). The same fear inhibited

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authorities from extending cash welfare payments to Australian Aborigines for much of the
twentieth century (Rowse 1998). In more recent times New Right advocates of welfare reform such
as Charles Murray (1984), Lawrence Mead (1991), Gertrude Himmelfarb (1994), and David Marsland
(1996) have asserted that welfare dependency leads to the erosion of not only self-reliance but also
other-regarding values.
Though continuity is evident between Pearson’s ideas and those of better known critics of welfare in
the US and the UK, his analysis of welfare in the exceptional context of Cape York deserves greater
scholarly attention than it has so far received. While moral arguments supplement the New Right’s
economic and philosophical criticisms of the welfare state, in Pearson’s writings about welfare the
concern with the corrosion of community norms is foremost.
This article argues for greater engagement with Pearson’s concerns about the moral limits of welfare
by comparing them with the political philosopher Michael Sandel’s concerns about the moral limits
of markets (2012). I argue that though Sandel’s argument is most likely to find receptive audiences
on a different end of the political spectrum from Pearson’s, the parallels between their arguments
are striking. While Sandel critiques the ever-increasing domination of American life by market logic,
Pearson critiques the domination of life in the Aboriginal communities of Cape York by the passive
welfare economy (a concept I explain below).
Sandel says we should be concerned by the extension of markets into all spheres of life because
‘markets don’t only allocate goods; they also express and promote certain attitudes towards the
goods being exchanged’ (Sandel, 2012: 9). Sandel shows that market values can crowd out other
values we should care about. Pearson’s central claim can be articulated in similar terms: the positive
values which have enabled his people to survive colonization are being crowded out by the values
promoted by the economic system in which they now find themselves. Pearson contends that the
institution of welfare as it exists in Cape York expresses and promotes certain attitudes towards the
goods it distributes, and moreover it expresses and promotes certain attitudes towards the people
who depend on it. He regards passive welfare as ‘poisonous’ in Cape York in part because of the
attitudes welfare recipients come to have towards themselves. Sandel is similarly concerned by the
lens through which market-oriented individuals see themselves and each other, though this is a
much smaller part of his argument. Like Sandel, Pearson portrays himself as fighting against a
collective complacency. Sandel argues that the misguided perception promoted by some economists
that market reasoning is morally neutral has blinded us to its moral corrosiveness (Sandel 2012: 8,
103). Pearson presents himself as an iconoclast, standing up against the complacency of non-
Indigenous progressives towards the economic exclusion of his people.
Sandel can be seen as the latest in a series of thinkers of various ideological persuasions to raise
concerns about the moral effect of markets. Anxiety about the erosion by competitive markets of
altruistic orientations and cooperative arrangements can be traced back to the eighteenth century
and has reappeared periodically, voiced by a diverse array of conservative, romantic and Marxist
thinkers (Titmuss 1970; Hirschman 1982; Fourcade and Healy 2007, 291-3; Satz 2010). This article
takes Sandel’s well-developed argument that markets are morally corrosive as an exemplar of this
broader literature.
The contrasting social effects of other economic systems – such as feudalism and kinship distribution
networks – have also received scholarly attention. Bowles argues that the rules and expectations

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governing allocation in different societies ‘influence the process of human development, affecting
personality, habits, tastes, identities, and values’ (Bowles 1998: 76). In a liberal welfare state such as
Australia, the logic of the market is dominant and the logic of welfare is secondary: non-market
income is reserved for those who are temporarily unable to meet their needs through the labour
market (Esping-Andersen, 1990: 42-3). Welfare should therefore not be expected to exert a strong
effect on community norms; recipients of unemployment benefits are still disciplined by the logic of
the market as they seek and prepare for their next job. According to Pearson however, the
Aboriginal communities of Cape York are so socially and economically disconnected from the rest of
the Australian population and their welfare dependency is so entrenched that the allocative logic of
welfare has begun to influence social norms and human development.
I proceed by describing in turn Sandel’s argument about markets and Pearson’s argument about
welfare. I then highlight a number of parallels between them as well as the important points of
contrast, before discussing the implications of recognising the moral limits of welfare.
Sandel on the moral limits of markets
Sandel writes that ‘The reach of markets, and market-oriented thinking, into aspects of life
traditionally governed by nonmarket norms is one of the most significant developments of our time’
(Sandel, 2012: 7). He believes this development should be cause for concern. His book focuses on
two objections to markets: the fairness objection and the corruption objection. He explains the
fairness objection as follows:
The fairness objection points to the injustice that can arise when people buy and sell things
under conditions of inequality or dire economic necessity. According to this objection,
market exchanges are not always as voluntary as market enthusiasts suggest. A peasant may
agree to sell his kidney or cornea to feed his starving family, but his agreement may not
really be voluntary. He may be unfairly coerced, in effect, by the necessities of his situation.
(Sandel, 2012: 11).
The second objection, the corruption objection, is the heart of the book and the one I will focus on in
this article. The corruption objection ‘points to the degrading effect of market valuation and
exchange on certain goods and practices’ (Sandel, 2012: 111). Sandel insists: ‘markets don’t only
allocate goods; they also express and promote certain attitudes towards the goods being exchanged’
(Sandel, 2012: 9). In other words ‘when we decide that certain goods may be bought and sold, we
decide, at least implicitly, that it is appropriate to treat them as commodities, as instruments of
profit and use’ (Sandel, 2012: 9).
A problem potentially arises because some types of goods are degraded when treated this way
(Sandel, 2012: 10). Buying and selling children, for example, is morally abhorrent because putting a
price on them is incompatible with valuing them appropriately (Sandel, 2012: 112). A market for
selling kidneys may ‘promote a degrading, objectifying view of the human person, as a collection of
spare parts’ (Sandel, 2012: 110). In his investigation into what money cannot and shouldn’t be
permitted to buy, Sandel goes on to suggest that creating markets for sexual services, college
admission, autographed sporting memorabilia, and the naming rights to civic venues are all
potentially problematic. Rather than calling for an outright ban on the sale of these goods he calls
for more debate on ‘the moral meaning of these goods and the proper way of valuing them’ (Sandel,
2012: 10).

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Sandel argues compellingly that extending markets into new spheres can erode nonmarket norms
(Sandel, 2012: 90-1). He supports this argument by referring to ‘A growing body of research [which]
confirms what common sense suggests: financial incentives and other market mechanisms can
backfire by crowding out nonmarket norms. Sometimes, offering payment for a certain behavior
gets you less of it, not more’ (Sandel, 2012: 114). Empirical research shows people are less willing to
engage in various civic-minded activities – from donating blood, to collecting money for charity, to
providing professional services to the needy, to accepting a toxic waste site in their town – when a
monetary reward is offered (Frey, Oberholzer-Gee & Eichenberger, 1996; Frey & Oberholzer-Gee,
1997; Frey & Jegen, 2001; Deci, Koestner & Ryan, 1999; Kunreuther & Easterling, 1996; Gneezy &
Rustichini, 2000a; Gneezy & Rustichini, 2000b; Ariel, 2009). Many people are ordinarily willing to do
these activities out of public spiritedness. But introducing financial incentives can lead to ‘the loss of
nonmarket norms and expectations’ and thereby ‘change the character’ of these activities (Sandel,
2012: 90). These activities come to be seen in a different light, which makes people more reluctant
to do them.
To speak of markets corrupting and degrading, demeaning or defiling ‘is to appeal, implicitly at least,
to conceptions of the good life’ (Sandel, 2012: 187). A more value neutral way of putting Sandel’s
idea – one which avoids appealing to any particular conception of the good life – is that markets
displace other norms and expectations. In discussing the allocation of various goods from kidneys to
college places to rock concerts tickets, Sandel contrasts markets with alternative systems based on
queuing, lotteries, merit and need. Markets often fare poorly in these comparisons. But there are
other allocative mechanisms – such as patronage or theft – in comparison with which markets might
look very appealing. Markets can crowd out bad norms as well as good ones. Sandel would surely
agree. He writes, ‘There’s no reason to assume that any single principle – queuing or paying – should
determine the allocation of all goods’ (Sandel, 2012: 40). He insists that each case must be discussed
individually (Sandel, 2012: 40).
Sandel’s ultimate conclusion is considered. He acknowledges that ‘A market economy is a tool – a
valuable and effective tool – for organizing productive activity’ (Sandel, 2012: 10). He doesn’t rush to
condemn every extension of market norms. Rather he urges that in each case we pause to ‘make a
moral assessment: What is the moral importance of the attitudes and norms that money may erode
or crowd out? Would the loss of nonmarket norms and expectations change the character of the
activity in ways we would (or at least should) regret?’ (Sandel, 2012: 90-1). In each situation the
harmful effects need to be weighed against the good that introducing markets might do.
Pearson on the moral limits of welfare
Let us now examine Pearson’s argument about welfare. Pearson is concerned with the experiences
of the discrete Aboriginal communities of Cape York Peninsula in Australia’s sparsely populated
north. These communities, which were formed from the missions and government reserves of an
earlier era, are geographically remote from centres of economic production. There has been little
employment available to the Aboriginal Australians who live in them since the collapse of Aboriginal
employment in the pastoral industry in the 1970s (Pearson, 2000: 30). The very specific geographic
and temporal context of Pearson’s observations is crucial to appreciating his moral critique of
welfare. Pearson attests, and outsiders who have worked in Cape York concur, that the
incorporation of Aboriginal people into Australia’s welfare system in the 1970s resulted in a ‘vast
improvement in the material circumstances’ of these communities, yet coincided with a breakdown

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in social order (Pearson, 2000: 15; Martin, 2001; Sutton, 2009; Hunter, 2013: 148-9). Pearson
controversially asserts there is a causal connection between long-term welfare dependency and the
alarming rates of violence, child neglect and other indications of social breakdown in Cape York.
Other authors however, attribute the social problems of these communities to other factors
including trauma, dispossession, distinctive Aboriginal cultural values and alcohol (Martin 2001;
Sutton 2009).
Though Pearson observes that in much of Australia the social security system has worked well, he
argues that in Cape York it has not functioned as intended. Rather than being an ‘income-support
safety net’ designed to help people through temporary periods of unemployment, welfare has
become the mainstay of the economy of Cape York (Pearson, 2000: 11; Pearson, 2009a: 188). While
the social security system might be intended to embody the logic of generalized reciprocity, offering
support to citizens in times of need in exchange for their contributions at other times in the
lifecourse, this is not how it is perceived on the ground in Cape York. Pearson contends that welfare
payments lack any sense of reciprocity because Aboriginal people in Cape York are so isolated from
labour markets that they do not expect to ‘repay via their taxes what they have received’ through
the welfare system (Pearson, 2000: 11). These payments are available indefinitely and have been, in
practice though not in theory, unconditional.
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Australia’s system of non-contributory, means-tested
residual welfare allocates money on the basis of rights deriving from citizens’ deficits rather than
their efforts or strengths. Welfare payments are highly stigmatizing, and although a citizenship
entitlement, they are experienced by Aboriginal people as a depersonalized, bureaucratized form of
charity. Pearson understands their underlying rationale as need alleviation. (He ignores other
rationales important to the development of welfare systems such as labour market efficiency,
egalitarian redistribution, the pooling of risk, solidarity, mitigation of class conflict and so on (Goodin
et al 1999: 21-36).)
The passive welfare economy - unlike the traditional subsistence economy of his ancestors
destroyed by white settlers, the agricultural subsistence economy of the mission era, and the market
economy today - does not demand that households contribute to their own material survival
(Pearson, 2000: 5). The traditional economy, the mission-era economy, and the market economy
provide a strong nexus between effort and reward, and necessitate a degree of discipline and
personal responsibility (Pearson, 2001: 139). . Pearson claims that the availability of unconditional
welfare discourages people both from seeking paid employment (Pearson, 2000: 22) and from
engaging in traditional subsistence activities such as hunting (Pearson, 2009a: 328-9).
Like conservative advocates for welfare reform in the US and UK, who charge welfare with
perversely entrenching the poverty it is intended to alleviate, Pearson believes that long-term
receipt of welfare payments erodes the work ethic (Murray, 1984; Mead, 2000; Field, 2001).
1
He
claims that reliance on passive welfare damages individuals by robbing them of initiative and making
them helpless (Pearson, 2001: 139; 2000: 5). Though Pearson’s thinking shares much with Lawrence
1
Given that Australia’s welfare regime is liberal rather than social democratic, it might be surprising that he
observes that welfare payments have a de-commodifying effect (cf Esping-Anderson 1990: 26-7). It is likely this
effect reflects the relatively undeveloped taste for consumer goods among Aboriginal people in the remote
locations he writes of, rather than the generosity of the payments. Prior to the 1970s ‘Aboriginal people living
in this region had little exposure to money’ (Martin 1995: 1).

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Mead’s, he is not preoccupied with the possibility that welfare payments encourage people to turn
down the low-paid jobs available to them. Pearson recognises that at least in the short term there
are few jobs available to his people. The problem he identifies is more that welfare dulls his people's
desire to invest in their productive skills and capacities, and induces them to remain in locations they
might otherwise venture from in search of work. He asserts that over time receiving ‘money for
nothing’ produces a distinctive ‘mentality’ whereby welfare recipients come to ‘see themselves as
victimised or incapable and in need of assistance without reciprocation’ (Pearson, 2000: 21). They
come to believe that they are entitled to what they want without needing to produce anything of
value to anyone else in return (Pearson, 2000: 22). ‘The passive welfare mentality results in ... our
people failing to take responsibility for ourselves as individuals, for our families and for our
communities’, he writes (Pearson, 2000: 22).
Importantly, Pearson holds that unconditional welfare erodes not just of self-regarding values but
other-regarding values as well. The mentality promoted by welfare, he writes, has had ‘a disastrous
impact on Aboriginal systems of sharing and obligations’ (Pearson, 2000: 31). Whereas traditional
Aboriginal society was ‘a truly wondrous social system based on reciprocity and care’, it has been
‘corrupted’ (Pearson, 2001: 139; 2000: 31, 66). The values at the heart of Aboriginal law – ‘trust,
respect and mutual help’ – have been displaced (Pearson, 2000: 5). He claims ‘passive welfare
undermines and ultimately unravels traditional relationships and values – and gives rise to social
problems and, ultimately, social breakdown’ (Pearson, 2009a: 329). The weaker members of society
– children and the elderly – suffer most from this displacement of customary norms of care
(Pearson, 2000: 31). Defenders of welfare consider one of its virtues its capacity to enable people to
escape control by others (for example, their family members) (Goodin, 1998: 123). Pearson on the
other hand argues that the freedom from constraints which welfare makes possible has greatly
undermined social order, making daily life chaotic within contemporary Aboriginal communities. This
chaos contrasts unfavourably, he believes, with the arrangement in classical Aboriginal society
whereby providers of resources had authority over recipients (Pearson, 2007) and even with the
social order imposed by the more successful Christian missions following colonisation.
Pearson is not unique in arguing that welfare corrupts norms of mutual help. Other conservative
critics of welfare believe that ‘welfare states warp our sense of collective responsibility’ (Schmidtz,
1998: 64). Peter Saunders, for example, asserts that ‘the expansion of government has “crowded
out” voluntary self-provision, philanthropy and mutual assistance’ (Saunders, 2007: 54). These
conservatives believe the welfare state compares unfavourably with the voluntary institutions which
predate it, such as friendly societies, through which people pooled risks and took responsibility for
the well-being of others in their community (Schmidtz, 1998: 63-72). They contend that such
institutions were ‘a major source of community strength’ (Saunders, 2007: 54) and gave better
expression to other-regarding virtues, such as community solidarity and collective responsibility,
than distant government bureaucracies.
Proposals for conservative welfare reform are frequently criticized by defenders of welfare
entitlements on the grounds that their most enthusiastic advocates are people with little firsthand
knowledge of the lives of welfare recipients (O'Connor, 2001: 231; Wacquant, 2009). The
racialization of welfare (Gilens, 1996) makes it easy to doubt the sincerity of welfare reform
advocates’ empathy for the poor (Goodin, 1998: 114). Pearson’s entry into this debate is significant,
and in the Australian context has had a transformative effect. This is partly because Pearson was an

8
Indigenous land rights campaigner of national significance before becoming a social reformer and
partly because as an Aboriginal person from a remote community he has firsthand knowledge of
daily life among the economically marginalised. He speaks from his observations of how welfare has
affected the norms in the communities he knows and his empathy with the downtrodden and
racially oppressed is more difficult to question than other welfare reform advocates’.
Comparison of Pearson and Sandel’s arguments
There are many parallels between Sandel and Pearson’s arguments. Sandel’s argues that marketizing
goods changes their character. He observes that ‘Standard economic reasoning assumes that
commodifying a good – putting it up for sale – does not alter its character. Market exchanges
increase economic efficiency without changing the goods themselves’ (Sandel, 2012: 113). Sandel
challenges this, arguing that market exchange can change what the goods being exchanged mean to
us: ‘markets and commerce change the character of the goods they touch’ (Sandel, 2012: 202).
Pearson makes much the same argument about welfare. Pearson disputes the economist’s
assumption that the value of an item isn’t affected by how one came by it. He believes that things
that are purchased with welfare money are valued less. The institution of welfare devalues the
money it provides: ‘Welfare money does not have the same value as personally earned money’
(Pearson, 2000: 22). Pearson contends this is because,
The resources of passive welfare are fundamentally irrational. Whereas the dollar earned
through a commercial or labour transaction has a rationale, the dollar given as a matter of
course has none (Pearson, 2000: 23).
Pearson claims that people are disinclined to invest the money they have if they are conditioned to
believe that regardless of what they do today, tomorrow will bring another cheque. The passivity
that welfare engenders leads to the squandering of the resources it provides (Pearson, 2009b: 99).
He writes:
Everyone in a passive welfare economy is susceptible to irrational (mis)appropriation and
(mis)expenditure of money, because that is the very nature of the money. Money acquired
without principle is money expended without principle (Pearson, 2000: 23).
Once the nexus between effort and reward is broken by welfare, people waste their time and their
opportunities (Pearson, 2000: 23). For this reason Pearson concludes that ‘passive income is not a
sustainable basis for a society in the long term’ (Pearson, 2005: 5).
Both Pearson and Sandel’s arguments are affirmations that there are intangible things that matter as
much or more than material goods. Pearson is arguing that this is true even for those in poverty. He
testifies that ‘Our social degeneration in fact accompanied the vast improvement in our material
condition from our earlier poverty over the past 30 years! We are socially poorer today despite
vastly improved material circumstances’ (Pearson, 2000: 39). Pearson says that the situation in Cape
York shows that ‘Access to material goods and cash is not itself a guarantee of success’ (Pearson,
2000: 15-6). Pearson and Sandel are both worried about the meanings that allocative practices
express. Sandel is concerned by what putting a dollar sign on certain goods expresses. Pearson is
concerned about what not putting a dollar sign on other goods expresses. Just as ‘some of the good
things in life are corrupted or degraded if turned into commodities’ (Sandel, 2012: 10), some good

9
things are perceived to be less valuable, argues Pearson, if they are distributed in accordance with
the logic of residual welfare. Pearson and Sandel also draw attention to what allocative practices
express about people. Sandel worries that allowing the rich to buy their way out of queues erodes
civic norms. Pearson worries about the effect of a highly stigmatizing form of welfare on recipients’
self-esteem and identity. The centrality of recipients’ deficits to the allocative logic of residual
welfare means that welfare payments always convey the message that there is something wrong
with the recipient (CYIPL, 2005: 6).
Sandel explicitly says that market values ‘crowd out’ other values we should care about (Sandel,
2012: 113). The problem Pearson describes can also be framed in terms of some values crowding out
others: in communities which are heavily dependent on welfare, the principle of need alleviation
starts to crowd out other important values. Aboriginal people come to believe that as society’s
victims ‘it is their right to have assistance without reciprocation’ (Pearson, 2000: 21). Just as Sandel
worries that social relations are being ‘made over in the image of the market’ (Sandel, 2012: 11),
Pearson believes ‘Passive welfare has come to be the dominant influence on the relationships,
values and attitudes of our society in Cape York Peninsula’ (Pearson, 2000: 23).
Many of the values Sandel worries will be crowded out by market thinking could be described as
‘other regarding’: he is worried about concepts such as friendship, altruism, intimacy, civic
togetherness and mutual obligation. Pearson is similarly concerned about the crowding out of other-
regarding values, especially those he associates with Aboriginal traditional culture such as caring for
children and the elderly, trust, respect and cooperation for mutual gain. Pearson is also worried
about the loss among the Aboriginal underclass of self-regarding norms, such things as self-reliance,
personal responsibility, pride in one’s own achievements, saving money for the future, taking care of
one’s possessions, protecting one’s health, and investing in income-generating skills. When taken to
an extreme these self-regarding values can be damaging – it is easy to join Sandel in finding too
much self-regard and not enough other-regard in the present neo-liberal era – but the erosion of
self-regarding values can be harmful too.
Why should we worry about the crowding out of self-regarding norms? Pearson would answer that
some of the moral understandings that inform practices like waged labour are conducive to human
well-being. In doing so he echoes David Hume and Adam Smith’s claim that commerce and industry
promote the virtues of industriousness, assiduity, frugality and probity (Hirschman, 1982: 1464-6).
Like other conservative critics of welfare Pearson celebrates ‘self-interest’ as a ‘powerful engine’ for
individual and social development because he sees it as a spur to effort, improvement and
innovation (Pearson, 2010). He connects the norms that markets promote with the development of
the self-confidence and self-efficacy that the people of Cape York will need if they are to achieve
progressive social change. If Sandel urges us to debate what of value we lose if our lives are
dominated by the market, Pearson urges us to consider the psychological and social cost paid by
communities dominated by welfare.
Both Sandel and Pearson’s arguments are rooted in a concern about a certain type of economic
relation (markets, welfare) exceeding its proper bounds. Sandel is warning against the problems that
come from the over-extension of market values into too many parts of our lives. This is a trend that
has become particularly worrying in the USA and other parts of the world since the 1980s (Sandel,
2012: 5-6). Pearson is describing the negative impacts for communities in which the role of welfare

10
has exceeded its normal boundaries. He claims that social democracy reaches its limit when ‘the fate
of the disadvantaged [is] seen to depend too much on the altruism of the economically and socially
integrated mainstream’, perversely undermining the self-regard of the poor (Pearson, 2010). In his
part of the world this problem has been developing since the 1970s. Some of the communities
Pearson writes about experience ‘almost complete dependence on cash handouts from the
government’ (Pearson, 2000: 5) as a result of colonial dispossession, geographic remoteness and
inadequate schooling (Pearson, 2000: 14). In these historically and geographically exceptional
locations welfare has exceeded its proper bounds because it does not help people through
temporary periods of unemployment but constitutes the main form of subsistence over a lifetime
for ‘the permanently unemployed and marginalised’ (Pearson, 2009a: 188).
Sandel and Pearson are both concerned about the cumulative effects of thousands of small
transactions. Sandel points to commercial practices which appear to have been ‘morally contagious,
or at least suggestive’ (Sandel, 2012: 195). Though perhaps not overly troubling in themselves,
practices such as selling the right to name stadiums has ‘prepared the public mind to contemplate
further incursions of commercial practices into civic life’ (Sandel, 2012: 195). It is the excess which is
the problem (Sandel, 2012: 188). For Pearson the trouble with welfare is not each individual
payment but their cumulative effect on people’s mentality. This has come about because in Cape
York, which is far from labour markets, welfare payments are not sufficiently balanced with other
sources of income: ‘When people have only one means of existence the nature of that income
obviously influences their whole outlook’ (Pearson, 2000: 23). He believes the lack of reciprocity
welfare embodies is contagious from one sphere of life to another. People habituated to passive
welfare who then develop drug or alcohol addictions ‘treat other people in our society in the same
way as the passive welfare resource: these people (wives, girlfriends, parents, grandparents,
children, relatives) are not valued and respected … These people are simply a source of resources
(money, shelter, food, comfort and care) and they treat them accordingly (Pearson, 2000: 24-5).
The most important point of difference between Pearson and Sandel is that Pearson betrays
elements of the blind enthusiasm for markets that Sandel cautions against. It is not obvious that
Pearson and Sandel would agree on what the limits of markets should be. Pearson has reconciled
himself to the inevitability of capitalism. He treats the laws of the free market as laws of nature.
Pearson embraces the virtues of self-reliance and investment in human capital that are required for
success in the market economy. He sees the market as an engine of growth rather than a driver of
inequality. Pearson equates deriving an income from employment with achieving 'independence'
rather than becoming dependent on employers, and overlooks entirely the downsides – such as loss
of autonomy – connected with this form of dependence. He valorises ‘the moral worth of the
productive individual within the market economy’ (Martin 2001: 6), while ignoring other sources of
self-regard such as unpaid caring work and other contributions to family and community wellbeing.
Pearson’s arguments have tended to find favour with those on the right, who are ready to concur
that ‘mainstream employment is not only essential for material well-being, but also for self-respect’
(Hughes, 2007: 90).
Pearson’s enthusiasm for markets is connected to his endorsement of welfare conditionality. One of
his proposed correctives to demoralization is making welfare conditional on recipients’ compliance
with certain social expectations, rather than a citizenship entitlement. The intention is for welfare
conditionality to imitate the direct reciprocity of contribution and benefit found in market

11
transactions. In light of the evidence Sandel presents for the crowding out of intrinsic motivation by
extrinsic motivation, we should consider whether the extrinsic motivation created by welfare
conditionality might undermine citizens’ intrinsic motivation to behave in the ways sought. It is also
worth noting that making welfare payments more conditional on behaviour is unlikely to reduce
their stigma or improve the self-regard of people receiving them.
Some on the left of Australian politics have been dismissive of Pearson’s argument, associating calls
for greater economic integration for Aboriginal people with the neoliberal quest to bring all parts of
life into the realm of the market (Altman 2007: 310, 312). The importance of market ideology to
Pearson’s thinking can, however, be overstated. Pearson’s argument is distinct from the libertarian
complaint that the welfare state redistributes taxpayers’ money to the undeserving. He does not call
for a reduction in social expenditure. Pearson addresses his argument not to the neo-liberal
attackers of the welfare state, but to its supporters, ‘those of us who take seriously our social
responsibilities and who passionately understand and support the important achievement of the
welfare state’ (Pearson 2001, 139).
Implications
Part of what makes Sandel’s argument so compelling is his use of empirical evidence. Sandel draws
upon a rich empirical literature from economics and psychology among other disciplines. Pearson’s
evidence base is his on-going observation of the communities of Cape York and the oral histories he
has collected of the era before welfare came to these communities. There are also some
experimental studies that speak to the issue he raises. Goodin (1993) concludes from his review of
the literature from psychology that there is empirical evidence to support the claim that state-
supported welfare could lead to moral atrophy. Furthermore, Bowles points to ‘numerous
experiments [which] suggest that “earning” a claim on a resource differs in psychologically important
ways from simply receiving one’ (Bowles, 1998: 104). However, recent experiments in the
developing world offer evidence against the claim that people value free and subsidized resources
less than those they pay full price for (Banerjee & Duflo 2011: 57-58). It may be that it will be
possible to deal with Pearson’s argument by finding sufficient evidence to refute its empirical
validity, but this has not yet been done. The plausibility of Pearson’s causal claim means that it is not
sufficient to dismiss it out of hand, especially since there is an ‘impressive’ amount of evidence
consistent with the more general hypothesis that ‘economic institutions influence motivations and
values’ (Bowles, 1998: 76).
That said, even if it was proven that unconditional welfare erodes self-reliance, there are still ways of
defending unconditional welfare. After all, as Sandel concedes, ‘Arguments from corruption are not
always decisive’ (Sandel, 2012: 154). Rather we need to assess the moral importance of values being
corrupted, and judge whether the cost of changing the meanings surrounding an activity outweighs
other considerations. Ultimately there is a question here of which norms we cherish and want to
protect.
A central element of the dispute over state-funded welfare programs is whether self-reliance is an
important value in the first place. Those of a social democratic persuasion believe conservatives
overrate it. For example, Goodin writes: ‘Personal responsibility for welfare is a good thing, in its
place. Our task must be to keep it in its place’ (Goodin, 1998: 195). Even if defenders of welfare
entitlements do believe that self-reliance is an important human value, one whose corrosion they

12
would regret, they might still prioritise the value of alleviating material need. If their critics are right
that state provision of welfare crowds out localized forms of mutual help that give better expression
to public spiritedness, social democrats can still make the case that the benefits of universal pooling
of risk outweighs this consideration (see for example Goodin, 1998: 162-167). Similarly if they
conceded that unconditional welfare undermines social order by removing constraints, this might be
a cost they consider worth paying for the sake of ensuring vulnerable people greater freedom from
domination. In sum, defenders of welfare entitlements might concede that welfare does have moral
downsides, but these moral downsides are worth putting up with because the alternatives are
worse.
Greater scrutiny and coercion of individual welfare recipients welfare is only one part of Pearson’s
proposed approach to the social problems of Cape York. He also argues for greater investment in
human capital (particularly through higher quality schooling for children and better school
attendance), and more government investment in regional economic development. These ideas are
more promising and more in keeping with his core insight that the situation in Cape York is an
aberration, in other words that welfare contributes to social deterioration only where opportunities
for economic engagement are absent. Furthermore, economic transformation at a regional level
need not be market-based. The hybrid economy approach to Indigenous development developed by
economic anthropologist Jon Altman represents an alternative way of tackling Indigenous economic
exclusion (Altman 2001; Altman 2005; Curchin 2013). This strengths-based approach to
development emphasises the need for government investment in social enterprises in industries in
which Indigenous peoples resident in remote regions have particular advantages, such as land
management for conservation, hunting and fishing, eco-tourism, and arts and crafts.
Conclusion
In this article I have drawn attention to the structural similarity between an argument Sandel makes
about markets and an argument made by Pearson. Both Sandel and Pearson are concerned that
structures of distribution embody certain attitudes to the goods distributed and to the people
involved in the transactions. Both are concerned that when allocative mechanisms exceed their
proper bounds social norms are distorted or corrupted. Though critics of welfare are concerned
about the erosion of self-regarding norms, their argument is also, like Sandel’s, about the loss of
other-regarding norms such as trust, respect, care for the weak and mutual help.
I want to suggest that if we find plausible Sandel’s claim concerning the corrosion by the market of
important values we should not dismiss too quickly the conservatives’ claim concerning the
corrosion by welfare of important values. My position is reminiscent of Hirschman’s conclusion that
those who have praised the moral effects of markets and those who have criticized markets’
corrosion of important values may share the truth between them (Hirschman, 1982). Though highly
targeted welfare payments can alleviate extreme material poverty, at least in the part of the world
Pearson writes about this has come at a social cost. Defenders of welfare entitlements have paid
insufficient attention to the reasons why we should be concerned when welfare becomes the
mainstay of the economies of some communities. Thinking of the moral limits of welfare as akin to
the moral limits of markets might help them do that.
Supporters of state-funded welfare programs, such as Goodin, have rightly been keen to point out
the fallacies within conservative arguments for welfare reform and the bad faith in which such

13
arguments have sometimes been made. They have particularly sought to defend the poor from
blame for their poverty and to critique punitive approaches to welfare reform. The remarkable
impact of conservative proposals for welfare reform has made these tasks imperative. My objective
in this paper has not been to defend these proposals or their implementation, but to argue for more
analytical engagement with one of the concerns that motivate them: namely that unconditional
state provision of income to the needy may, in contexts of extreme economic marginalization,
erode important values such as self-reliance and mutual help. Though Pearson's analysis speaks to
the failure of residual welfare to alleviate suffering in a very specific context it may have broader
applicability. Observers of other remote regions of Australia have perceived its relevance beyond
Cape York (McKnight 2002: 210; Peterson 2010; Austin-Broos 2009). It may also be pertinent in
other countries which, like Australia, have liberal welfare regimes and populations suffering deep
social and economic exclusion. As technological change reduces demand for low-skilled labour,
Pearson's insights might become increasingly relevant in other developed countries in which
economic opportunity is distributed highly unequally.
Even if conservatives’ assessment of unconditional welfare is correct, it is a separate question
whether the neopaternalist policies designed to address these problems are effective. There is also
the important question of whether the enforcement of welfare conditionality involves too great a
compromise of recipients’ dignity, privacy and autonomy to be tolerable in a liberal democratic
society. Greater investment in regional economic opportunities makes more sense than punitive
treatment of individual welfare recipients. Perhaps there is no way to solve the problems with
unconditional welfare Pearson and other conservatives identify, or at least no way for governments
to solve these problems without doing greater harm.
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i
Officially these unemployment benefits were conditional upon being available for work and actively seeking
employment. However, for many people living in remote Aboriginal communities these benefits in effect
became unconditional because it was deemed too administratively difficult to determine whether or not they
were meeting these conditions as a consequence of their remoteness from government offices (Sanders 1999).