Free money - an option to escape from banking slavery

2024 Author: Seth Attwood | [email protected]. Last modified: 2023-12-16 15:55

The economic wonder of Wörgl

“Once upon a time…”, this is how many fairy tales begin and this story really sounds like a fairy tale: there was a railway worker in the small Austrian town of Wörgl, more precisely, a steam locomotive driver who was elected mayor, burgomaster in 1931. His name was Michel Unterguggenberger and he was born into the family of a land-poor peasant in Tyrol. At the age of 12, he was forced to leave school and go to work as a sawmill assistant in order to help the family. But he did not want to remain as assistants for a long time, and at the age of 15 he became an apprentice to a mechanic in the city of Imst. At that time, the apprentice paid the master for training and Michel had to save penny for penny, he paid part of the amount later, being already an apprentice. After working as an apprentice for several years, he went on a journey to expand his knowledge and see new countries. His path lay across Lake Constance to Vienna and further to Romania and Germany. So, on his travels, the artisan Mikhel, who was interested in everything, got acquainted with the first forms of the working community: the trade union and the consumer association.

At the age of 21, Michel Unterguggenberger goes to work on the railway and is sent to the Wörgl junction. Despite a good job and striving to do what was assigned to him as best as possible, he does not get promoted because he is a Social Democrat and a trade union activist. In 1912, the trade union sent him as a representative to the personnel committee of the Austrian State Railways, to the group "Locomotive brigades of the Innsbruck section". At the end of the First World War, he was elected regional leader, then deputy mayor, and in 1931 he became mayor of the city of Wörgl with all its 4216 inhabitants.

Dozens of books and hundreds of studies have been written about the global economic crisis of the 1920s and 1930s. It was a time of dire need for the unemployed, which largely helped Hitler to come to power in Germany.

In 1930, 310 railway workers worked at the Wörgl junction, in 1933 there were only 190 of them! The unemployed peppered their former colleague, whom they had chosen as burgomaster, with requests for help.

But what could he do? Unemployment was on the rise not only among railroad workers. There were no large factories in the city, and small firms in the city and its districts were falling apart before our eyes; the number of recipients of unemployment benefits grew. In addition, the number of people cared for by the kitchen for the underprivileged increased; in 1932 there were 200 of those “excluded from the tax roll”.

Michel Unterguggenberger, although he did not have a ready-made idea, did not sit idly by. He thought, "Educated people who have written many books on economics, they already know what to advise!" While reading the works of Karl Marx, he came across the name of Joseph Proudhon, who wrote The System of Economic Contradictions, and read this book in one gulp. But it’s not that! It was only after reading the work of Silvio Gesell, The Natural Conduct of Economics, that a salutary idea came to his mind. He reread the selected pages over and over again until he was convinced that he had found the answer to his questions. And since Unterguggenberger had the idea to help those in need, he developed a help program.

First of all, he met separately with each member from the city government and from the charity commission and talked with them until he was convinced of their support for his idea. Then he called a meeting at which he said:

In our small town, there are 400 unemployed, of which 200 are struck off the tax roll because of poverty. In the region, the number of unemployed reaches 1500. Our city cash desk is empty. Our only source of income is tax debts of 118,000 shillings, but we cannot get a dime on them; people just don't have money. We owe 1,300,000 schillings to the City Savings Bank of Innsbruck, and we are unable to pay interest on this debt. In addition, we owe the Land and Federal governments, and since we do not pay them, we cannot expect them to pay our share of the budget. Our local taxes brought us only 3,000 shillings in the first half of the year. The financial situation in our region is getting worse as no one is able to pay taxes. The only figure that keeps growing and growing is the number of unemployed.

And then the burgomaster laid out his plan for "Disappearing Money".

The National Bank issues money into circulation, but this circulation is very slow, it needs to be accelerated. The sums of money must quickly change their owners, that is, money must once again become a medium of exchange. Of course, we ourselves cannot call our medium of exchange "money" since this is prohibited. But we will call it “Proof of Completion”. We will issue such "Confirmations" in the amount of 1, 5 and 10 shillings (from these figures one can imagine the size of the salaries of that time). The most important question is: Will merchants accept these Confirmations for payment?

This is where an important chapter of our tale begins: "Confirmations" were accepted as a means of payment. The tenant received the rent due with them, the seller in the store counted them in payment and accompanied the buyer with the words: "Thank you, come again!"

First of all, the most necessary work began in the city. As the first landscaping work, on July 11, 1932, the laying of sewerage was started in one of the districts, long overdue road works and asphalting of the main streets. The volume of work was 43.386 shillings, of which only a part was paid as salary. It took 500 shifts to build the ski jump, a help kitchen for 4,000 shillings, and so on. A quarter of all registered unemployed were able to receive bread again and the situation in the families of the unemployed improved.

The payment of salaries was carried out to everyone, without exception, only by “Confirmations”. From the city administration, they were sent to the foreman, he distributed them among his builders, and they paid with them to the baker, butcher, hairdresser, etc. The city government was in charge of issuing the Confirmations, but they could be bought at the Wörgl Credit and Loan Society and sold there for real money.

Why, however, this plan was called "Vanishing Money"? It provided for a monthly depreciation of "Confirmations" by 1%; a year came out 12%. For this percentage, the owner of "Confirmation" had to buy a stamp of 1, 5 or 10 grosz, which at the end of the month was pasted on "Confirmation". If there was no stamp on the Confirmation, it was depreciated by the specified 1%.

Proof of completion for 10 shillings

The next chapter of our tale: the bank did not charge any fees for managing the "Confirmations" turnover, all profits were sent to the city cashier. The Credit and Loan Company issued loans from its income to persons whose creditworthiness was not in doubt, at (fabulous) 6%. Payments at this interest were also transferred to the city treasury.

The news of the improvement in the situation in the city of Wörgl and the surrounding area went around the world. Wörgl has become something of a pilgrimage site for economists. All of them spoke very well about the advantages of "Disappearing Money", because it was pointless to store them in the house, their owners put them in a savings bank. And since these means of payment were circulating only in Wörgl, large purchases were made with them and no one had to go shopping in Innsbruck.

The Swiss journalist Burde wrote: “I visited Wörgl in August 1933, exactly one year after the experiment began. Despite everything, we must admit that his success borders on a miracle. The streets, which were previously in a terrible state, can now be compared only with the Autobahns. The building of the City Council has been overhauled and is a beautiful mansion with blooming geraniums. On the new concrete bridge there is a commemorative plaque with a proud text: “Built with free money in 1933”. All working residents are staunch supporters of free money. Free money is accepted in all stores on a par with real money."

Residents of Kitzbühel, neighboring Wörgl, initially laughed at the experiment, but soon decided to try it out at home. They issued 3,000 shillings of vanishing money; 1 shilling per inhabitant. Means of payment issued in both cities were accepted for payment both in one and in another city without restrictions. Numerous provinces wanted to follow Wörgl's example, but chose to wait anyway for the government's action to end.

The Fascist government of Dollfuss filed a lawsuit. Wow! A simple worker who went to school only until he was 12 years old, did not study either national or international economics, does not have a single academic title, a railway worker and a social democrat dare to correct the Austrian monetary system! Only the National Bank is allowed to issue money of any kind. "Disappearing money" was banned. Burgomaster Unterguggenberger did not accept the ban and filed a protest in court. The proceedings went through all three possible instances, but to no avail. On November 18, 1933, his protest was finally dismissed. But since filing a protest with the court could not postpone the execution of previously adopted court decisions, “Vanishing money” was withdrawn from circulation on September 15th.

Since that time, we have experienced and experienced a lot: the puppet state of Dolphuss, Hitler's Third Reich, the hardships and hardships of World War II and the hard work of rebuilding what was destroyed. Today we are a state from which the rest of the world can take an example in many ways. But the example of Wörgl and his wise burgomaster, we must not consign history to oblivion.

Annette Richter, published in the monthly edition of the Austrian Trade Union Association Work and Economy, March 1983.

Example from Russia:

Shaimuratiki in Shaimuratovo

An amazing story about how their own "money" was invented and put into circulation in a Bashkir village.