Well not quite, but en route to a gathering of Ashoka Fellows in Austria where I’ll be for the next couple of days, I by chance found myself in the Austrian town of Wörgl, famed for its alternative currency experiment in the 1930s… The Wörgl was introduced to the town in 1932, at the height of the Depression, when a third of the town was without work. It is an amazing story.
The town’s then Mayor, the wonderfully named Michael Unterguggenberger, was taken with the idea that the national currency promoted hoarding and disincentivised spending, and proposed instead what he called “Certified Compensation Bills” (not a name to trip off the tongue I grant you). The notes were issued by the Council, who agreed to accept them as currency. The idea of the Wörgl was that it was money that went off, it lost value over time, a process known as ‘demurrage’. The notes needed to be stamped each month, or else they depreciated by a small amount, which incentivised its rapid turnover (a feature of the Stroud Pound). The back of the notes contained the following explanation;
“To all whom it may concern! Sluggishly circulating money has provoked an unprecedented trade depression and plunged millions into utter misery. Economically considered, the destruction of the world has started. It is time, through determined and intelligent action, to endeavour to arrest the downward plunge of the trade machine and thereby to save mankind from fratricidal wars, chaos, and dissolution. Human beings live by exchanging their services. Sluggish circulation has largely stopped this exchange and thrown millions of willing workers out of employment. We must therefore revive this exchange of services and by its means bring the unemployed back to the ranks of the producers. Such is the object of the labour certificate issued by the market town of Wörgl : it softens sufferings dread; it offers work and bread.”
The scheme led to a time of extraordinary success for the local economy. Bridges were built, houses, a reservoir, new roads and other infrastructure. Six neighbouring villages followed suit, and before long, over 200 towns were also considering the scheme. A fascinating eye witness account of the scheme’s success comes from Claude Bourdet, a master engineer from the Zürich Polytechnic who visited the town and described it thus;
I visited Wörgl in August 1933, exactly one year after the launch of the experiment. One has to acknowledge that the result borders on the miraculous. The roads, notorious for their dreadful state, match now the Italian Autostrade. The Mayor’s office complex has been beautifully restored as a charming chalet with blossoming gladioli. A new concrete bridge carries the proud plaque: “Built with Free Money in the year 1933.” Everywhere one sees new streetlights, as well as one street named after Silvio Gesell. The workers at the many building sites are all zealous supporters of the Free Money system.
I was in the stores: the Bills are being accepted everywhere alongside with the official money. Prices have not gone up. Some people maintained that the system being experimented in Wörgl prevents the formation of equity, acting as a hidden new way of exploiting the taxpayer. There seems to be a little error in that view. Never before one saw taxpayers not protesting at the top of their voices when parting with their money. In Wörgl no one was protesting. On the contrary, taxes are paid in advance; people are enthusiastic about the experiment and complain bitterly at the National Bank’s opposing the issuing of new notes.
It is impossible to dub it only a “new form of tax” for the general improvement of Wörgl. One cannot but agree with the Mayor that the new money performs its function far better than the old one. I leave it to the experts to establish if there is inflation despite the 100% cover. Incidentally price increases, the first sign of inflation, do not occur. As far as saving is concerned one can say that the new money favors saving properly so-called rather than hoarding money. As money lost value by keeping it at home, one could avoid the depreciation by depositing in the savings bank.
Wörgl has become a kind of pilgrim shrine for macro-economists from a variety of countries. One can recognize them right away by their learned expressions when discussing the beautifully maintained streets of Wörgl while sitting at restaurant tables. Wörgl’s population, proud of their fame, welcomes them warmly.”
Then, after a few years, the Central Banks, appalled by the scheme’s success, took a court case which reasserted their right to be the only institution able to issue money. The notes became illegal, and within a short period of time, the town returned to the 30% unemployment rates it had seen just a few years previously. I would have liked to be able to have more of a nose around, as it was my experience of Wörgl was a rather fine piece of pizza for breakfast and then getting back on another train again, but I feel honoured to have set foot in this town which, for all too short a period of time, took control of its future and told a story that still inspires now, more than 70 years later.