Story of Wörgl and others

The Miracle of Wörgl

Wörgl was the first in town in Austria that effectively managed to eliminate the extreme unemployment caused by the Great Depression. Its local currency experiment was such a success that it gained worldwide attention. That effort became known as the “Miracle of Wörgl .” For the full details, go here. Here is the summary of that story.

On July 5th 1932, in the middle of the Great Depression, the Austrian town of Wörgl made economic history by introducing a remarkable complimentary currency. Wörgl was in trouble, and was 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 with which to carry them out. These included repaving the roads, streetlights, extending water distribution across the whole town, and planting trees along the streets.

Rather than spending the 40,000 Austrian schillings 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 type of complimentary currency known as ‘stamp scrip’. The Mayor then proceeded to hire people to do infrastructure projects for the town and the community quickly went from an unemployment rate of over 30% to near zero, as that money began to circulate very rapidly.

Of all the business in town, only the railway station and the post office refused to accept the local money. When people ran out of spending ideas, they would pay their taxes early using scrip, resulting in a huge increase in town revenues. Over the 13-month period the project ran, the council not only carried out all the intended works projects, but 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 neighbouring 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 neighbouring 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.

At this point, the central bank panicked, and decided to assert its monopoly rights by banning complimentary currencies. The people unsuccessfully sued the bank, and later lost in the Austrian Supreme Court. It then became a criminal offence to issue ’emergency currency’. The town went back to 30% unemployment. In 1934, social unrest exploded across Austria. In 1938, when Hitler annexed Austria, he was welcomed by many people as their economic and political saviour.

Nonetheless, the success of Wörgl attracted the attention of one of the leading economists in the U.S. at the time, Professor Irving Fisher, who informed the FDR administration he thought that idea could be used to end the Great Depression. That story is next.

Irving Fisher, the Great Depression and FDR

When Professor Irving Fisher learned of the success of Wörgl and other European experiments, he determined that “The correct application of stamp scrip would solve the Depression crisis in the U.S. in three weeks.” He presented his findings to Dean Acheson, then under-secretary of the Treasury under FDR. Acheson sought input from Harvard economics professor Russell Sprague, who told him that this approach could indeed succeed in bringing America out of the Depression, but cautioned him to check with the President.

He did so. Unfortunately, fearing decentralization, President Roosevelt denounced complementary currencies soon afterwards and they were prohibited. He did so in probably his most famous address, the one including the phrase “The only thing we need to fear is fear itself.”

In that speech he also announced that by “executive decree” he would henceforth prohibit ‘emergency currencies’. This was the code name for all the complementary currencies already in existence, and all those in preparation around the country. That prohibition lasted for decades.

Imagine if Fisher’s recommendation had held the day. The Great Depression would have ended well before World War II and a great deal of suffering would have been avoided. Fortunately, complementary currencies are now legal in just about every country, as evidenced by the popularity of cryptocurrencies, one form of a complementary currency.

The Central Middle Ages and Cathedrals

We now come to one of the most prolonged and significant times where the use of complementary currencies had a profound and widespread positive impact on the communities that adopted them. Here we find a sustained period of 250 years (1040-1290) of financial success based on local currencies spread throughout Western Europe.

Chapter 6 from the book, New Money for a  New World by Bernard Lietaer (co-architect of the Euro) and Stephen Belgin details that period of widespread abundance throughout Western Europe that can be directly attributed to the extensive use of local currencies.

The authors note that, “There was work for all, with favorable working conditions and abundant time for family, community, and personal pursuits. This epoch was also characterized by significant advancements in science, technology, education, literature, music, arts, craftsmanship, and more.”

It all commenced when communities like Paris decided they wanted to build a local cathedral like Notre Dame, each a massive infrastructure project that lasted on average between 50 and 100 years. Those communities printed their own money and hired architects, stone masons, carpenters, lead workers, glass workers and more to build those magnificent edifices and more. 

What most people don’t know is that those citizens were directly responsible for building more than 1,000 cathedrals in Western Europe, alongside 350,000 churches and several thousand large abbeys. That was a building phase rarely matched throughout history.

Month after month those communities paid those workers “new money” they printed up which in turn was injected into the local economy. That money was spent on food, clothing, shelter and all the necessities of life, which stimulated all manner of new local merchants and the jobs they produced.

“This medieval building phenomenon is more remarkable still,” say the authors, “given that there was no central authority, church or otherwise, in charge of initiating or funding the construction of these cathedrals. Contrary to popular belief today, these structures were neither built by nor belonged to the church or nobility.

Local nobility and royalty customarily did make contributions, but these monuments were typically owned and financed by the citizens of the municipalities where they were built.”

Those efforts initiated over 800 years ago are still providing financial returns today. Tourists flock to those cathedrals bringing with them money that they leave in the communities they visit. Almost nothing in history has provided a greater return on investment.

More examples

See this document, Complementary Currencies in Use for more examples of complementary currencies and the positive impact they had on the communities that adopted them.