Community currencies

Can an experiment made over 80 years ago point a way out of the current economic crisis? This is the Worgl Experiment of 1932-3.

Worgl is a small southern Austrian town (today's population is 12,000). In 1932 the town (with a population then of 5,000) had 30 per cent unemployment and it was close to bankruptcy. Given the depression, people were reluctant to spend what little money they had.

Mayor Michael Unterguggenberger (1884-1936) was inspired by the economist Silvio Gesell (1862-1930). Gesell argued that the slow circulation of money was a cause of the faltering economy.

Therefore there should be "demurrage": the intentional depreciation of a currency over time, with the object of its not being hoarded, and instead speed its circulation from person to person.

In July 1932 Worgl issued its own stamp script currency ("labour certificates"). For each schilling of local currency issued, one schilling of official currency was deposited (at interest) in a bank account to cover the demands for redemption.

The depreciation (demurrage) rate was 1% per month. To maintain its value, it was necessary to affix a stamp at the end of each month. The notes expired at the end of the year but could be exchanged (free of charge) for new ones, so long as the necessary stamps had been affixed.

On September 1 1933 Austrian Central Bank banned complimentary currencies. The Worgl Experiment was attracting too much attention and so the bank was worried that other towns would also follow suit.

Among the advantages of the Experiment were: the stamp script was used to pay back taxes. and some of the money was used to finance infrastructure development and so reduced the rate of unemployment. Overall it was seen as a successful experiment.

But Austria was annexed by Hitler's Germany in 1938 and then taken up by World War II. The popular recollection of the Worgl Experiment disappeared from the history books. However Michael Unterguggenberger has recently received posthumous fame because of the renewed attention to the Worgl Experiment.

The Experiment had two features: demurrage and the creation of a complimentary currency; the latter is now a far more popular idea.

Banking and money should exist to support people – and not to exploit them. Meanwhile there is renewed attention to local economic activities that support other local economic activities (rather than having the profits sent overseas by transnational corporations).

For example, there are the "Bristol Pounds" UK community currency launched in 2012 both as paper notes and via e-banking. The pounds can only be spent at local businesses or be used to pay local rates and taxes. Each pound is backed by a pound sterling deposited at Bristol Credit Union. This has boosted local Bristol economic activities.