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An Experiment in Worgl

topic posted Sun, April 8, 2007 - 9:19 PM by  B
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The 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 Unterguggenberger.

Michael Unterguggenberger


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.


Wörgl

Worgl 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 penniless.


Silvio Gesell

Michael 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 circulation.

Worgl Money

On 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.

The 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.”

Worgl Success

Over 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.

Six 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.


One 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.

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."

The Central Bank

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.
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B
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  • Re: An Experiment in Worgl

    Mon, April 9, 2007 - 4:10 AM
    That's a great story. Thank you for that. No surprise I suppose thast this wasnt something that we were taught in history class at school.
    • B
      B
      offline 123

      Re: An Experiment in Worgl

      Mon, April 9, 2007 - 6:57 AM
      This is one story of many that happened during the pepression. There were hundreds of local currency successes in the US durig the depression. None of them are taught in US schools. In fact do US schools even teach the history and structure of the Federal Researve system> In high school I had the notion that the Federal Reserve was part of the US government.
  • Re: An Experiment in Worgl

    Tue, April 10, 2007 - 10:53 PM
    Thanks all for this thread!

    A local columnist always rants about "moonbats" in his columns. I was disappointed when he explained the word to his readers recently never mentioning George Monbiot. Here are some comments Monbiot made at a Transition Towns meeting transitionculture.org/2007/04...n-towns/ I think it's interesting that while the regular readers of the blog take issue with him about his view of Peak Oil, they enjoyed hearing their local complementary currency compared to Worg.

    Stirling Newberry has written some really interesting posts on oil and economic. Recently at The Agonist agonist.org/stirling_new...ndle_solution and one from a few months ago at TPM Cafe coffeehouse.tpmcafe.com/blog/c..._future Newberry hasn't talked about alternative currencies much that I know about, but does spend some time on taxes which are an indispensable part of the broader discussion of alternative money.
    • Re: An Experiment in Worgl

      Wed, April 11, 2007 - 9:11 AM
      hi john, in the article in transition towns it briefly mentiones the Totnes Pound. Is that as in Totnes nr Dartmouth Devon UK?

      I used to be a member in their L.E.T.S scheme. Perhaps it has evolved? I'd be keen to find out more, if you can give me more info.
      • Re: An Experiment in Worgl

        Wed, April 11, 2007 - 7:28 PM
        Hello Jana, yes indeed it is Totnes in Devon UK. I'll have to go back through the blog and see what's there. I don't think that their Totnes Pound have anything to do with the L.E.T.S scheme transitionculture.org/2007/03...ulation/ It seems to me a separate experiment on a very limited scale.

        Quite beside the point : A friend of mine died a few days ago and as a result I got to be among people I've known since college. I'm 51 and the cohort is 50's to early 60's. I mention it because in our youth many of us were probably pretty much "there" as far as the mindset behind transition towns. Not everyone has been as lackadaisical as I in trying to actually act on this vision. But mostly we are all very far away from that now. What's interested me about the blog Transition Culture transitionculture.org/ is the example that something can be done among regular people. Admittedly, the US and UK have strikingly different settlement patterns; i.e., the whole premise of fueling the economy on a suburban housing boom hasn't been quite so marked as it has been here in the US. So Tontnes has a community that's more geographically centralized.

        Still, being among friends, who mostly "settled down and did the right things" made me think that now that the kids are basically grown up that something akin to what Rob Hopkins is doing in Tontnes to mobilize the community around energy descent planning could actually succeed where I am. I'm so incredibly incompetent at organizing anything. But at least I'm slightly encouraged to try a little harder.

        You might also be interested to see the Totnes Transition Town Web site www.transitiontowns.org/Totnes/
        • Re: An Experiment in Worgl

          Thu, April 12, 2007 - 1:23 AM
          yes last I heard was that the L-e-t-s- scheme died there.. for lack of practical uses and overload of those who offered those. (I know the Health food shop offered the mark up in lets, or the wholefood bakery too, and I used to get weekly organic veg on lets.. so many thigs... but mostly people where offering non practical things like massage and astrology readings etc, which could not sustain the system.

          I am still in mail contact with some of the core group members of that day, and I suspect a few of them are now in the ransitiontown project. Totnes has a big advantages for such a project.

          It is pretty small
          It has Tourism as an outside money source to feed it
          It has a very high density of likeminded (alternative ) population
          It has several colleges and schools nearby supporting ecology and sustainability (dartington trust, schumacher college, park school, steiner school nearby etc)
          It has plenty of land and is famous for its prosperous vegetation/ natural springs and such (organic or permaculture farms)

          The totnes council however was quite conservative when I was there, and there was a big rift between the "newcomers" (i.e. alternatives) and the old inhabitants, but this is over 15 years ago..
          There are good conditions there for such schemes to work,- so I hope it will take off :-))

          (an interesting piece of history btw: when brutus founded Britain, he layed the founding stone in Totnes! its still there!)
          en.wikipedia.org/wiki/Brutus_of_Troy

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