Money is not an unmixed blessing. Total
dependence or misuse of money may lead to undesirable and harmful
results. In the words of Robertson, “Money, which is a source of so
many blessings to mankind, becomes also, unless we can control it, a source of peril and confusion. The following are the various disadvantages of money:
1. Instability.
A great disadvantage of money is that
its value does not remain constant which creates instability in the
economy. Too much of money reduces its value and causes inflation
(i.e., rise in price level) and too little of money raises
its value and results in deflation (i.e., fall in price level).
Inflation distorts the pattern of distribution in favour of the rich ;
thus, it makes the rich richer and the poor poorer. Deflation, on the
other hand, results in unemployment and hardships to the working class.
2. Inequality of Income:
Money, through its excessive use and
inflationary effect, creates and widens the inequalities in the
distribution of income and wealth. This had divided the society into
'haves' and 'have-nots' and has led to a class conflict between them.
3. Growth of Monopolies:
The use of money leads to the
concentration of wealth in a few hands and this gives rise to
monopolies. Growth of monopolies results in the exploitation of the
workers, brings misery and degradation to them.
4. Over-Capitalization:
Easy borrowing and lending facilities,
made possible through money, may lead certain industries to use more
capital than is required. This over-capitalization, in turn, results in
over-production and unemployment.
5. Misuse of Capital:
Money, which is the basis of credit,
leads to the creation of more and more credit creation. Credit
creation, if not matched by the increase in production, results in
inflationary rise in the prices.
6. Hoarding:
In the materialistic world, people give
undue importance to money and, instead of utilising in productive
activities, may start hoarding. This would adversely affect the growth
of income, output and employment of the economy.
7. Black Money:
Money, due to storability
characteristic, is the cause of the evil of black money. It provides
people a convenient way to evade taxes by concealing their income.
Black money, in turn, encourages black marketing and speculative
activities.
8. Political Instability:
Wide fluctuations in prices and business
activities, caused by money, may lead to political instability. This
may result in the change of government.
9. Moral and Social Evils:
In the modern times, moral values have
been sacrificed at the alter of money. People have become so much
money-minded that they openly indulge in corrupt practices to satisfy
their greed for money. Money is also the root cause of thefts, murders, frauds and other social evils.
To conclude:
The defects of money do not, however,
indicate its elimination. The advantages of money far exceed its
disadvantages. It is a good servant and a bad master. What is required
is the proper regulation of money supply through a wisely formulated
monetary policy to ensure the efficient working of the economic system
and to achieve the socio-economic objectives of the economy.
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