An Experiment in Worgl…
year was 1932; the world was gripped by the greatest economic depression that it
had ever known. One man in a small town decided to try something new to help the
people of his community. In doing so the town made economic history. The town
was Worgl in the Bavarian province of Germany. To understand the Worgl
experiment you have to understand the man behind it. The towns mayor Michael
was born into an old Tyrolean peasant family. He lived the life of a poor
European without falling into the mental trap of heavy blue-collar work. He
apprenticed himself to a master mechanic. After apprenticeship he became a
journeyman mechanic. At the age of twenty-one he had his first post at the Worgl
railway station. His striving for social justice jeopardized his personal
advancement. In taking a stand for his fellow workers as a trade union man, he
was not promoted any higher. In 1912 he was elected representative for the union
of Innsbruck Rail Engineers in the committee for personnel. Yet to the officials
of the Austrian Railroad network he was seen as the person who represented the
concerns of the workers against the moneyed interests of the railroad. Later
Alex von Muralt would write that Michael Unterguggenberger always stressed that
he was not a Marxist.
was a small town that had grown rapidly in the early 1900’s. Then came the
crash of 1929, which quickly spread, into Europe. Michael was town councilor, he
soon became deputy mayor. In 1931 he was elected mayor of Worgl. As mayor he had
a long list of projects he wanted to accomplish. Projects like repaving roads,
street lighting, extending water distribution across the entire town and
planting trees along the streets. But in the midst of the depression out of the
towns population of 4,500, 1,500 were without a job and 200 families were
read and re-read "The Natural Order" by Silvio Gesell. He talked with
people in the town and convinced the members of the Worgl Welfare Committee to
hold a session on July 5, 1932. In this session he gave a short summary and then
proposed a "Distress Relief Program". He stated that slow circulation
of money is the principal cause of the faltering economy. Money as a medium of
exchange increasingly vanished out of working people’s hands and accumulates
into the hands of the few who collect interest and do not return it back to the
market. He proposed that in Worgl the slow-circulating National Bank currency
would be replaced by "Certified Compensation Bills". The council would
issue the Bills and the public would accept the Bills for their full nominal
value. Bills would be issued in the denominations of 1, 5 and 10 shillings. A
total issue of 32,000 Worgl "Money Bills" was printed and put into
July 31, 1932 the town administrator purchased the first lot of Bills from the
Welfare Committee for a total face value of 1,800 Schillings and used it to pay
wages. These first wages paid out were returned to the community on almost the
same day as tax payments. By the third day it was thought that the Bills had
been counterfeited because the 1000 Schillings issued had already accounted for
5,100 Schillings in unpaid taxes. Michael Unterguggenberger knew better, the
velocity of money had increased and his Worgl money was working.
Worgl money was a stamp script money. The Worgl Bills would depreciate 1% of their nominal value monthly. To prevent this devaluation the owner of the Bill must affix a stamp the value of which is the devaluation on the last day of the month. Stamps were purchased at the parish hall. Because nobody wanted to pay a devaluation (hoarding) fee the Bills were spent as fast as possible.
reverse side of the Bills were printed with the following declaration: "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 13-month period the Worgl money was in circulation, the mayor carried out
all the intended works projects. The council also built new houses, a reservoir,
a ski jump, and a bridge. The people also used scrip to replant forests, in
anticipation of the future cash flow they would receive from the trees.
neighboring villages copied the system successfully. The French Prime Minister,
Eduoard Dalladier, made a special visit to see the 'miracle of Wörgl'. In
January 1933, the project was replicated in the neighboring city of Kirchbuhl,
and in June 1933, Unterguggenburger addressed a meeting with representatives
from 170 different towns and villages. Two hundred Austrian townships were
interested in adopting the idea.
eyewitness report was written by Claude Bourdet, master engineer from the
Zürich Polytechnic. "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.
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
The Central Bank panicked, and decided to assert its monopoly rights by banning complimentary currencies. The case was brought in front of the Austrian Supreme Court, which upheld the Central Banks monopoly over issuing currency. It then became a criminal offence to issue "emergency currency". Worgl quickly returned to 30% unemployment. Social unrest spread rapidly across Austria. In 1938 Hitler annexed Austria and many people welcomed Hitler as their economic and political savior.
Germany was headed towards WWII and with the aftermath of the war much of what happened in pre war Germany just like what happened during the war was suppressed by the world. Germany was being rebuilt in the West’s image. The Worgl experiment was relegated to history.