Wörgl was the first city in Austria that managed to effectively eliminate the extreme unemployment caused by the Great Depression. Its local currency experiment was so successful that it attracted worldwide attention. That effort became known as the “Miracle of Worgle”. For complete information, go hereHere’s a summary of that story,
On July 5, 1932, in the midst of the Great Depression, the Austrian city of Wörgl made economic history by introducing a remarkable complimentary currency. Vorgel was in trouble, and was ready to try anything. Out of its population of 4,500, a total of 1,500 people were without jobs, and 200 families were indigent. The mayor, Michael Unterhagenberger, had a long list of projects he wanted to complete, but he hardly had any money to complete them. These included reconstruction of roads, street lights, expansion of water distribution throughout the city and planting of trees along roads.
Instead of spending 40,000 Austrian schillings in the city treasury to start these projects, he deposited them in a local savings bank as a guarantee for the issuance of a type of complimentary currency known as ‘stamp scrip’. The mayor then began hiring people for infrastructure projects for the city and the community quickly went from an unemployment rate of over 30% to near zero, as money began to circulate very rapidly.
Of all the businesses in the town, only the railway station and the post office refused to accept local money. When people ran out of ideas to spend, they would use the shares to pay their taxes early, resulting in a huge increase in city revenue. Over the 13-month period of the project, the council not only completed all the intended work projects, but also built new houses, a reservoir, a ski jump and a bridge. People also used the script to replant forests, in anticipation of the future cash flow they would receive from trees.
Six neighboring villages successfully copied the system. The French Prime Minister, Edouard Daladier, made a special trip to see the ‘Miracle of Wörgl’. In January 1933, the project was repeated in the neighboring town of Kirchbühl, and in June 1933, Untergugenberger 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. Subsequently issuing ’emergency currency’ became a criminal offence. The city went back to 30% unemployment. In 1934, social unrest spread throughout Austria. In 1938, when Hitler took over Austria, many welcomed him as their economic and political savior.
Nonetheless, Worgel’s success attracted the attention of one of America’s leading economists at the time, Professor Irving FisherThose who informed the FDR administration thought the idea could be used to end the Great Depression. That story lies ahead.