Miracle of Worgl

In these days of miracle and wonder (not), when our collective orbit has been reduced to the home office and anxiety, and is now only hesitantly expanding again, larger questions abound.

Like, what is the future of money? Can it still work? Or, can it work in a different way? Who gets to give you money, when you’re sitting in lockdown? Are the rules of capitalism set in stone? What if money had a use-by date? What if keeping money had no advantages?

Imagine a place where money was freely issued. And where it cost you to actually hold on to that money. It sounds like a farcical inversion of the immutable ‘laws’ of capitalism, but these revolutionary ideas have actually been trialled – and successfully too.

Allow me to introduce the Wörgl Mircale – or Experiment, depending on your point of view.

Wörgl (groovy name) was a wee town in Austria that tackled the Great Depression of the 1930s in a novel way. It broke all the rules of standard capitalist economic theory.

Wörgl printed money. They gave it to the townsfolk, for free. Whaat? you may say, but it worked. Truly. Well, for about 13 months – until other more powerful forces in capitalism, in that country and the world at the time, intervened.

Here’s how it happened. Like small towns everywhere in the Great Depression, Wörgl had people sitting around, out of work. And shops with no customers. The usual story.

Wörgl had a population of 4,216. Being a railway junction, the railway employed 310 people in 1930, but by 1933 the number had plummeted to 190, following the transition to electric loco’s. The cement plant in nearby Kitzbühel employed 50 workers in 1930, but by 1933 only 2, merely as custodians.

The Zipf brewery sacked between 10–14 workers from the previous 33–37. A cellulose factory had once employed 400 workers. In 1933, just four men were there, idly guarding idle machines. Farmers, a third of the work force, could hardly sell their products at depressed prices.

But the town’s mayor, Michael Unterguggenberger (even groovier name!) suggested something radical. Let’s print our own money. Money that you can’t really keep.

He went around the town talking face-to-face to his electors, trying to convince them of his scheme. At first, they were understandably suspicious – just like the folk in the Peter Sellers movie The Millionaire, where he tries to hand out bank notes on the street corner. The bürgers of Wörgl thought about it. Then they agreed. These were desperate times.

Previously Mayor Unterguggenberger had read an article in a little-known journal, Der Physiokrat, and totally bought the idea of money that fades in value. He reckoned a local currency operating along these lines would solve their two biggest problems in Wörgl (and the world at the time): falling prices and the slow circulation of money.

The mayor convened a session of the Wörgl Welfare Committee on 5 July 1932, and gained formal approval for his madcap idea.

The experiment began with the first printing of 1,000 schillings worth of notes on the 31 July 1932. These ‘Certified Compensation Bills’, Wörgl’s own currency, were initially used by the town to pay government wages.

It was cheerfully named Freigeld – ‘Free money’ – or more correctly, and less promisingly, as Stamp Script, if you prefer. The fine print – which I imagine the good folk of Wörgl blithely ignored – was that the money was set to decline by 1 per cent in value every month.

Result: a boom in local government projects, and a corresponding increase in employment and economic activity not just in the government sector, but throughout the town. People had to spend their free money. And spend it they did, on contractors to do building, on food and furniture and stuff in the local shops, to pay farm workers to plough the land and bring in the crops. People paid their taxes.

This was all an extension of the wider theoretical concept of Freiwirtschaft (free economy), proposed by the then recently-deceased Silvio Gesell (1862–1930), who had written the persuasive piece in Der Physiokrat. For Gessell’s ‘free’, read ‘absolutely free, as in the air you breathe’ – rather than in the qualified terms of a ‘free market.’

Freigeld was just a part of this utopian ideal, building on Gessell’s ideas of Freiland (free land), where all land is owned by public institutions and can only be rented, not purchased; and Freihandel (free trade). The American writer Henry George also had these notions way back in 1879. And of course, the Communist states of the time were also into this – but with an entirely different meta-narrative in place.

Gessell was a colourful character, with most profiles of him running to several descriptors: anarchist, German-Argentinian merchant, libertarian socialist, social activist, theoretical economist. vegetarian commune-dweller. And a bloke who often went bust. The magazines he started, Geld-und Bodenreform (Monetary and Land Reform), and Der Physiokrat, folded due to censorship or simply harsh financial reality. Naturally, he got to thinking hard about money – or more precisely, the structural problems of the established international monetary system. In 1891, he wrote his foirst book on the subject: Die Reformation des Münzwesens als Brücke zum sozialen Staat (The Reformation of the Monetary System as a Bridge to a Social State), followed by two others, Nervus Rerum and The Nationalization of Money. Then a spate of 25 publications in German and three in Spanish.

Returning from Argentina to Germany in 1915, he kept his radical ideas alive, and for a very brief while was the ‘Peoples’ Representative for Finances’ in the brutish and short tenure of the Bavarian Soviet Republic, which collapsed in 1919. He was tried for treason and temporarily imprisoned, but then acquitted.

For all his outwardly revolutionary credentials, Gessell, surprisingly, has gained glowing testimonials from way more mainstream economists. From Professor Dr Irving Fisher of Yale University: “Free money may turn out to be the best regulator of the velocity of circulation of money, which is the most confusing element in the stabilization of the price level. Applied correctly it could in fact haul us out of the crisis in a few weeks ... I am a humble servant of the merchant Gesell.” And John Maynard Keynes, erstwhile Fellow of Kings College, Cambridge: “Gesell's chief work is written in cool and scientific terms, although it is run through by a more passionate and charged devotion to social justice than many think fit for a scholar. I believe that the future will learn more from Gesell’s than from Marx’s spirit.”

Anyway, Wörgl money worked differently from the stuff we use now. It had a use-by date. It didn’t pay to accumulate it. You had to spend your allocation by the end of the year – or it would decline in value by 12 per cent. In dry economic terminology, this is called currency demurrage. “Whatever,” said the people of Wörgl. And carried on spending up large.

Irony, bigly, these days is that Wörgl banknotes are now seriously collectible items – worth a fortune, especially those with the devaluation stamps attached.

Anyway, Wörgl money had the proven effect of jump-starting the local economy. Things started humming. The money had to be used, you see. Where’s the problem in that?

The town was transformed into a thriving regional hub, while the rest of the country suffered the usual Great Depression tribulations.

This may be the point where we recall Mark Twain’s acerbic observation: “If it is a Miracle, any sort of evidence will answer, but if it is a Fact, proof is necessary.”

The people of Wörgl had their proof. It was all too plain to see. Freigeld for all.

Now, money as we know it, was invented to accumulate in value. For those of a religious bent, that is reflected in usury – the practice of lending money at unreasonably high rates of interest, so the money you give out comes back as more. That’s what caused Jesus to lose his cool at the Temple on the Mount. And in the next Abrahamic religion that came along, Islam, the charging of interest came to be seen as sinful.

People further than Wörgl’s town limits sat up and took notice; among them such luminaries as French Premier Edouard Daladier and the economist Irving Fisher, mentioned above. The ‘miracle’ gained fame (notoriety to some, as we shall see), and other towns wanted to copy the experiment hoping for similar success. Nearby villages even arranged to accept each other’s script. In June 1933 Mayor Unterguggenberger was the star at a presentation in Vienna for 170 Mayors—they were intrigued on hearing reports from Wörgl. Among the attendees, some opined that it would be a go to introduce ‘magic money’ in their communities too.

But the rich and powerful didn’t like it. Wörgl did not fit their script. It was supposed to be their schtick to hold great sums of money (and therefore power), and for this money to accumulate. The poor folk, like those in Wörgl, were supposed to borrow money from the rich folks at exorbitant interest rates.

So, under pressure from the wealthy elite, the Austrian government capitulated. The Wörgl miracle was murdered by the Austrian National Bank on 1 September, 1933.

Looking back on the whole of Wörgl thing, contemporary economists say the Miracle couldn’t last. They use dry and dreary and self-serving arguments like, “any threat to centralized control is a threat to the money power”(Yeha! Right on!); or “Wörgl could not legislate or enforce monopoly legal tender, so the demand for the scrip is partially attributable to the need to pay taxes” (so what?); or “In a matter of days the national script held as backing in the bank would have been exhausted” (but who needs banks anyway, when you get free money?) or “Wörgl was not a miracle, but an example of Keynesian spending given incentive by Gresham’s Law” (blah, blah…).

By the way, Gresham’s Law states simply that “Bad money drives out good.” In other words, if there two types of commodity money are being used, and they are both accepted as having similar face value, then the more valuable commodity will slowly disappear from use. Gresham’s Law is being widely cited in discussions about the future of Bitcoin – a whole new story.

But you could say the ‘experiment’ of capitalism as we know it – endless growth and resource extraction, the rich getting richer and the poor getting poorer – can’t last anyway.

And now we have a new window on this central deceit of conventional capitalism. How come, we ordinary folk say, the economies of the world collapse when people buy only what they need? Like we all did during the Covid-thing.

So it would seem, that in Wörgl’s case, to use C S Lewis’ famous dictum, “Miracles do not, in fact, break the laws of nature.”

Come back Wörgl money. We need you now.