“To all whom it may concern ! Sluggishly circulating money has provoked an unprecedented trade depression and plunged millions into utter misery. Economically considered, the destruction of the world has started. - It is time, through determined and intelligent action, to endeavour to arrest the downward plunge of the trade machine and thereby to save mankind from fratricidal wars, chaos, and dissolution. Human beings live by exchanging their services. Sluggish circulation has largely stopped this exchange and thrown millions of willing workers out of employment. - We must therefore revive this exchange of services and by its means bring the unemployed back to the ranks of the producers. Such is the object of the labour certificate issued by the market town of Wörgl : it softens sufferings dread; it offers work and bread.”-Inscription on the back of Worgl alternative money (1932)
As the stock market crashes and economic turmoil seems all but inevitable many have been thinking back to the days of the great depression. Alas, it seems we little people can do nothing but wait on the Federal Government,
and it's official monetary policy producer and the privately owned and operated Federal Reserve to rescue us from the sins of the fat cats on Wall Street.
We might be waiting until a certain nether world freezes over.
Back in 1931-32 the small town of Worgl, Austria was suffering from the result of the 1929 stock crash. There was no investment, no spending, 30% unemployment and civil unrest (When Hitler came through 5 years later and annexed them, they greeted him as an economic savior).
But the little town of Worgl had a creative Mayor. The Mayor of Worgl was not highly educated, but he had read enough of economist Silvio Gesell to understand that his desire for the prosperity of the working class was not dependent on the wealthy (trickle down economics) nor was it dependent on the ideals of Marx, who advocated taking back the means of production from the wealthy by force.
Instead, as Gesell theorized, the solution lay in a more efficient and effective money system. As has been previously blogged here at greentheo, money is useless as a medium of exchange if it does not flow around a society. Gesell makes it painfully clear that money is not wealth. Instead, Gesell promoted the idea that wealth and prosperity is the ability to obtain real goods via trade. If, then, we want the average world citizen to have increased prosperity we need not take wealth by force, we simply need to decrease the ability for large amounts of money to have an advantage in trade over smaller amounts.
If money itself loses value over time, just like the underlying goods that it can purchase do, then it will become a better medium of exchange and take away the advantage of holding large amounts of it.
Money properly understood is a means to an end, not an end in itself.
So as Worgl struggled to maintain roads, and feed the starving poor the Mayor of this small town decided to give Gesell's ideas a try. He devised a new money system in which a 1% tax on money had to be paid each month (not a tax on wealth, but a tax on money). The money was passed into circulation via wages for city employees and was required to be accepted as legal tender by all town business.
It worked so quickly (within 3 days) that the Mayor began to be suspicious of fraud, but in reality it was a smashing success. Soon income taxes (taxes on wealth) were being paid ahead of time (to avoid the 1% tax on money). A new ski jump was built. Streets were not only maintained but new ones constructed that became the envy of Austria. The town was at full employment and even forests were being replanted for the purpose tax sheltering (again avoid 1% money tax by investing in something that could be sold in the future for today's price).
Imagine if in today's world we invested in forests and wildlife habitats not because we wished to "do the right thing" but because it was a good investment and a tax shelter.
Worgl's local economy became so successful within the year that many of the neighboring Austrian cities began to adopt the Gesellian "Free-money" as it was known. Even the French across the border became interested in the new monetary system. An economic gathering of the minds attracted macro-economists from around the world who came to see the "Miracle of Worgl".
Alas, the short lived joy and prosperity came to an abrupt end. The central bank of Austria asserted it's monopoly control of the money supply and outlawed alternative currencies (like "Free-money"). After unsuccessfully suing for the right to print their own currency the town of Worgl return back to the national currency. The roads fell into disrepair and quickly 30% unemployment returned.
5 years later Hitler rolled through on his quest for world domination and millions lost their lives in the battles ensued.
Could a better monetary system have saved countless hours of pain, death and destruction? Could a better money system stop the crushig poverty experiencd by so many billions in the world?
Don't just take my word for it, think about it yourself.
(This entry mostly paraphrased from )