In 1932, in the middle of the Great Depression, the Austrian town of Wörgl was in trouble and prepared to try anything. Of its population of 4,500, a total of 1,500 people were without a job and 200 families were penniless. The mayor Michael Unterguggenberger had a long list of projects he wanted to accomplish, but there was hardly any money to carry them out. These projects included paving roads, streetlights, extending water distribution across the whole town, and planting trees along the streets.
Rather than spending the 40,000 Austrian Schilling in the town’s coffers to start these projects off, he deposited them in a local savings bank as a guarantee to back the issue of a currency known as stamp scrip. The Wörgl money required a monthly stamp to be stuck on all the circulating notes for them to remain valid, amounting to 1% of the each note’s value. A businessman named Silvio Gesell came up with this idea in his book The Natural Economic Order.
Nobody wanted to pay for the monthly stamps so everyone receiving the notes would spend them. The 40,000 schilling deposit allowed anyone to exchange scrip for 98 per cent of its value in schillings but this offer was rarely taken up. That was because the scrip could be spent as one schilling after buying a new stamp. The money raised with the stamps was used to run a soup kitchen that fed 220 families.
Over the 13-month period the project ran, the council not only carried out all the intended works, but also built new houses, a reservoir, a ski jump and a bridge.
The key to its success was the fast circulation of the scrip money within the local economy, 14 times higher than the Schilling. This increased trade and created employment. Unemployment in Wörgl dropped while it rose in the rest of Austria. Six neighbouring villages copied the system successfully. The French Prime Minister, Édouard Daladier, made a special visit to see the ‘miracle of Wörgl’.
In January 1933, the project was copied in the neighbouring city of Kitzbühel. In June 1933 major Unterguggenberger addressed a meeting with representatives from 170 different Austrian towns and villages. Two hundred Austrian townships were interested in adopting the idea. At this point the central bank decided to assert its monopoly rights by banning scrip money.
One can only imagine what had happened if communities all over the world had been free to copy the idea. The Great Depression may have ended in 1936 and World War II may never have happened. It can be a lesson for the future. If another major economic crisis is about to plunge the world into another world war, this ‘miracle money’ may be able to prevent that from happening.
1. The Future Of Money. Bernard Lietaer (2002). Cornerstone / Cornerstone Ras.