However, the comparative per capita amounts of money (in terms of American dollars) in circulation in different countries is far from being a true index of their industrial development or of their commercial activity. Indeed, beyond a certain point the larger average amount of money in cir 4 See Vol, I, p. 43, on the decline of barter.
ciliation in a country may indicate backwardness in the de velopment of banks and other credit agencies rather than greater amount of wealth or of business. Notice, for ex ample, the medium position of the great commercial countries, Germany and the United Kingdom, as compared with other countries above and below them in the following list.
§ 8. Relative importance of money. Because money is the general expression of purchasing power, and comes to symbolize all other wealth, it often assumes undue and ex aggerated importance in men's eyes. Money is but one of many forms of wealth. It constitutes but a small percentage of the total wealth of a country, and it is far from being the most indispensable to human welfare. Yet its importance, as a whole, in determining the form of industrial organization 5 These figures for a year just before the outbreak of the World War are in terms of the American gold standard dollar, and are retained here as indicating much better than later statistics what may be the "normal" situation, in those countries that had the gold or silver standards at that time.
The immense issues of paper money in many of these countries since 1914, as well as the changed value of gold, has quite altered the present status of the monetary stocks.
is enormous. In a society without money industrial processes would be very different, and trade would be hampered in manifold ways.
If a poor community has relatively little money it is because it cannot afford more ; it gets along with less money than is convenient, just as it gets along with fewer agents of every other kind than it could use. Pioneers in a poor community where the average wealth is low cannot afford to keep a large number of wagons, plows, good roads, or schoolhouses. If the members of the community were wealthy enough each would have more of these and of other things, and the sum total of money would be greater. Great as is the convenience of money, poorer communities have to do with little of it. It is, therefore, a confusion of cause and effect when poor communi ties imagine that their poverty is due to the small amount of money in circulation.
Many of the most common errors in economics are the result of confusion as to the real nature and place of money. The
word "money" is so often used, in a figurative sense, for any or all of the goods for which it may be exchanged, that men forget that it is often a mere symbol of wealth and not the wealth itself. To give only two illustrations out of many that could be given : In relation to foreign trade, men continually speak of bringing money into the country, or of sending our money abroad, when in neither case, probably, has any money moved in the direction indicated. Again, in reference to the interest rate or to the causes of business crises, men speak of money being more plentiful or less plentiful, when the amount of money has either not changed or has changed in the con trary direction, and what is really meant is that some change has occurred in credit conditions. So persistent is this idea that there is hardly an economic problem in which this charac teristic monetary illusion does not serve to mislead popular opinion. The safest course for the student is to assume al ways that any explanation of processes of production or of trade in terms of money is superficial, and that the real forces and reasons are to be found only by penetrating more deeply into the situation.