SCHWUNDGELD: THE DEPRESSION SCRIP OF WÖRGL, AUSTRIA

Once upon a time there was a little village in Austria, which was hit hard by the Great Depression. Poverty and unemployment dominated, when the mayor developed an unconventional idea: His municipality planned to act as employer. But the employees were to be paid not in state money, but in demurrage-charged local currency. Thereby the mayor forced his employees to stop saving the money for hard times, but to spend it as fast as possible. The miracle occurred. In the middle of the crisis Wörgl witnessed boom years. Journalists and local politicians came from all over the world to learn how the village had overcome the Great Depression.

The story of Wörgl is no tale, but true. This is unfavorable, as true tales often end badly. Cause the government of Austria was not amused by the local initiative. They enforced the National Bank’s claim to be the only institution holding the right to issue legal money in Austria. Who cared that the new money had done good? It was forbidden by the highest administrative court of Austria on November 18, 1933. Once again, the State had asserted its claims at his citizens charge.

You may ask, why do I tell you this story? Well, let’s wait and see what’s going on with Bitcoins. I really wonder whether our national states will ever accept a supranational independent currency. And we are giving them the power to end this elaborate experiment within a second.

In the years after 1930 a new economic crisis afflicted the world. It did not result in inflation – quite the contrary: shocked by the hyperinflation of the German post-war era, the different states dabbled in a rigid austerity policy. The effect was that more and more people had less and less money at their disposal – they spent increasingly less money which led to a decline of demand which, in turn, resulted in layoffs depriving even more people of a regular income. It was a vicious cycle the politicians were not able to break.

At the same time, the instruments necessary to rethink were there already. In his works on Freiland and Freigeld, the theoretical economist Silvio Gesell had called for a “Natural Economic System”. Although not all of his ideas could be put into practice, the Schwundgeld nevertheless gained many supporters.

Gesell demanded money only as a means of exchange, unsuited for saving. To that purpose, he invented a currency that would not attract interest at the bank. On the contrary: to keep a note fit for circulation one had to affix a token to a fixed percentage of the total sum each month. To those unwilling to do that, only one option was left: to spend the note by the end of the month. The idea was to speed up the circulation of money with that surcharge and therewith boost the economy.

The theory was soon put into practice: supporters of the German Freigeld established the barter society WÄRA in Erfurt in 1929, with relative success: only two years later, more than 100 German companies belonged to that society. What a spectacular success when the mining engineer Max Hebecker bought a dead mine with his WÄRA loan and reopened it. An entire town received employment and an income that admittedly was based on the Wära but worked extremely well on the local scale. In 1931 however, Hebecker was forced to give up and file for bankruptcy: for fear of the right of issuing banknotes, the German finance minister had categorically denied the State Bank the production, emission and use of any emergency currency.

It was on July 5th, 1932, that a welfare association on a voluntary basis was brought into being: the community implemented a job creation scheme where the participants received their payments not in Austrian shillings but in labour certificates. These certificates could be bartered for goods at some shops – just like the real Austrian shillings. Other shops soon followed and in the end the new local currency became a real economy factor.

Unterguggenberger announced that those labour certificates would be accepted as a means to pay the municipal taxes as well. To encourage a rapid circulation the labour certificates were designed as Schwundgeld: each month a token at a fixed percentage of the sum had to be affixed to the note to keep it fit for circulation.

12.600 of the planned 32.000 shillings were issued as labour certificates – covered by the same sum in Austrian shillings deposited in a bank account as a pledge. And something miraculous happened: whereas an ordinary shilling achieved a turnover of 8.55 shillings per year – the community pays a worker one shilling, the worker later buys a coffee with that shilling, the cafe owner pays his sugar bill with it and so on – the labour certificates achieved 73 shillings thanks to the rapid circulation as a consequence of the depreciation.

Only 1.3 shillings per community member were circulating in Wörgl but that prompted a change of mood. Suddenly, everyone was convinced that the situation could be changed for the better. Improvements in the infrastructure like a restructuring of the station forecourt or the construction of a bridge made it visible to all that finally something was happening! The project was widely accepted. News travelled fast; even abroad the “Miracle of Wörgl” as the Berlin newspaper “12 Uhr Blatt” called it on April 18th, 1933, was on everyone’s lips.

To read the complete article, see: The Year of the Freigeld in Wörgl (www.coinsweekly.com/en/The-Year-of-the-Freigeld-in-Woergl/8?&id=17&type=a)

Wayne Homren, Editor