Page "Local currency" Paragraph 16

The Wörgl experiment that was conducted from July 1932 to November 1933 is a classic example of the potential efficacy of local currencies.

Wörgl, a small town in Austria with 4000 inhabitants, introduced a local scrip during the Great Depression.

By 1932, unemployment in Wörgl had risen to 30 %.

The local government had amassed debts of 1. 3 million Austrian schillings ( AS ) against cash reserves of 40, 000 AS.

Local construction and civic maintenance had come to a standstill.

On the initiative of the town's mayor, Michael Unterguggenberger, the local government printed 32, 000 in labor certificates which carried a negative 1 % monthly interest rate and could be converted into schillings at 98 % of face value.

An equivalent amount in schillings, deposited in the local bank as cover for the certificates in case of mass redemption, earned interest for the government.

The certificates circulated so rapidly that only 12, 000 were ever actually put into circulation.

According to reports by the mayor and economists of the day who studied the experiment, the scrip was readily accepted by local merchants and the local population.

It used the scrip to carry out 100, 000 AS in public works projects involving construction and repair of roads, bridges, tanks, drainage systems, factories, and buildings.

The scrip was also accepted as legal tender for payment of local taxes.

In the one year the currency was in circulation, it circulated 13 times faster than the official shilling and served as a catalyst to the local economy.

The heavy arrears in local tax collection declined dramatically.

Local government revenue rose from 2, 400 AS in 1931 to 20, 400 in 1932.

Unemployment was eliminated, while it remained very high throughout the rest of the country.

No increase in prices was observed.

Based on the dramatic success of the Wörgl experiment, several other communities introduced similar scrips.