For good gold, then, in court and camp it passes,
And for good gold, taken by the masses,
I must permit it, though it does seem odd.

The diminutive Tyrolese market town, Wörgl, which had hitherto passed a quiet and modest existence, has been much talked of in recent months, even abroad, in Switzerland and particularly in the United States where, I have been informed, the name Wörgl will soon be better known than that of Spengler and where a new currency policy is associated with that name. Wörgl owes Its present fame to its stalwart burgomaster, Michael Unterguggenberger, who has been for many years an advocate of Silvio Gesell's free money theory. In December 1931, Unterguggenberger became burgomaster and was thus enabled to put into practice long-cherished and well-considered currency plans within his little empire.

Wörgl is one of the few Tyrolese communes which until recently lived largely by industry. It had cement and cellulose works, which today are shut down. By the Spring of 1932, the number of unemployed in the parish, which has over 4.000 inhabitants, had risen to 350. and. if the neighbouring parishes be included, to 1.500. The tax revenues were falling. For instance, the federal part of the tax revenue had dropped from 63.000 schillings in 1928 to 43.800 schillings in 1932, and the provincial ones from 47.700 schillings in 1928 to 17.100 schillings in 1932. The Innsbruck savings bank to which Wörgl owes the enormous sum of 1.290.000 sch., raised in July 1931 its interest rate from 7 % to 10 %; the parish treasury was empty; and the Raiffeisen Bank at Wörgl had almost suspended operations, as all its assets, including those of the parish, were frozen. Urgent demands, such as road repairs, could no longer be postponed.

(1) This account, based on a personal visit, appeared in no. 6 (1933) of the Austrian periodical Standisches Leben, Blatter fur organiasche Gesellachafts-u. Wirtschaftalehre, the editor of which is Othmar Spann (Erneuerungs-Verlag, Berlin-Vienna). It is written by Alex von Muralt, a Swiss publicist, and concerns an experiment which has aroused keen interest not only in Austria, but in a number of other countries. Our readers will appreciate the impartial nature of this competent report.

Finding itself in this desperate situation, the parish council accepted the burgomaster's proposal to issue depreciating money experimentally.

a) Form and Legal Status of the Money Issued

At the beginning of July 1932, the parish arranged for the printing of paper notes to the value of 32.000 schillings, which it called labour certificates. The notes are numbered and are for 5 or 10 schillings respectively. They become only valid after being stamped at the parish hall. These notes depreciate monthly by 1 % of their nominal value. (Relief tax.) To prevent this devaluation, the owner of the note must affix on the last day of the month a stamp to the value of the extent of the devaluation. These stamps are purchased at the parish hall. Thus the depreciation, or relief tax, amounts annually to 12 %, over double the proportion suggested by Silvio Gesell. At the close of each year the certificates must be exchanged for new ones. There is no charge for the transaction, provided that the required number of stamps have been affixed to the certificates. Subject to a deduction of 2 %, the parish also undertakes to convert the labour notes into ordinary schillings. ( 1 )

b) Cover.

In order to be able to effect this conversion at any time and thereby to provide a cover for the relief certificates, the trustees (among whom is the parish priest) arranged to deposit at the Raiffeisen Bank an amount in legal currency equivalent to that issued in the form of depreciating money. As the director of the bank informs me, the money has been lent out to trustworthy wholesalers at 6 % interest in the form of sight-bills. The whole of this interest flows into the parish treasury, since the local savings bank gives its services gratis where a utility transaction is concerned.

( 1 ) The reverse side of the note contains the following declaration : " 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.

c) Circulation.

The depreciating money was brought into circulation by the parish paying its clerical and manual workers, at first 50 % and later 75 % of their remuneration, in relief money. The recipients had previously agreed to accept this form of payment. The first issue of 1.800 schillings took place in July 1932, and the monthly pay-sheet, so far as depreciating money was in question, rose later to approximately 3.000 schillings. As the certificates always quickly returned to the parish treasury. It became unnecessary to issue more than 12.000 schillings altogether and, accordingly, only 12.000 normal schillings had to be deposited at the Raiffeisen Bank.

All business establishments at Wörgl accept the relief money in payment and at its face value, and the paper notes return to the parish treasury in the shape of dues and taxes. However,"of the 12.000 schillings worth of relief money issued, only about two-thirds is in circulation. The remainder has disappeared, having been annexed by souvenir hunters and collectors. That such substantial amounts of depreciating money should vanish I in this way, contradicts the theoretical intention which aims at accelerating the circulation and not at hoarding. For the parish, however, the disappearance of notes is not unwelcome, since this represents for it a net gain.

d) Results.

Concerning the practical effect of the experiment I learnt the following this April. As already stated, all business establishments at Wörgl accept the relief money as if it were legal currency. Business men are, of course, not enamoured at the Idea of losing 1 % at the end of the month. If they cannot pass on the relief money, or 2 % if they desire to convert it into banknotes. They prefer ordinary money: but most of them favour the experiment because they believe that it slightly raises the turnover or at least stems the anticipated decrease In business. A grocer complained that the wholesale merchant from whom he obtains his wares, would accept only 50 % of relief money in payment. The wholesaler concerned, confirmed this statement and added that at the end of the month he also deducted 1 %, as the wholesale business cannot afford such losses. Although the relief money is of no appreciable use to his firm, he upholds the system, as it has saved the parish from shipwreck and as he thinks that if the system were extended over a larger tract, say over Tyrol, it might prove even more decidedly useful economically by greatly accelerating the circulation of money. The owner of a brush establishment, a member of the Tyrolese Chamber of Industry and Commerce, expressed himself equally in an appreciative manner. He, too. was convinced that the extension of the experiment to the whole of Tyrol would contribute to the revival of trade. Nor should it be forgotten that the policy of issuing depreciating money has been able to escape the general fate of policies in Austria (where politics dominate everything), of becoming a bone of contention between parties. All decisions of the parish council concerning relief money were reached with the unanimous assent of all the parties represented. No rise in prices appears to have occurred, if we except the fact that the price of milk was 2 groschen cheaper in a small village near Wörgl, a fact probably due to purely local conditions. At Innsbruck and Kitzbuhel I noted the same prices for the essential foodstuffs. There has been therefore no inflation.

The parish is the principal beneficiary of the experiment. The first direct gain resulting from the depreciating money is the 12 % relief taxation derived from the circulating certificates. It is true that the whole of this percentage is not collected, since a certain proportion of the certificates lie at the close of the month at the parish hall where they have also to be stamped, but, of course, free of cost. The monthly revenue from the relief tax amounts to about 50 schillings. According to the information furnished by the director of the Raiffeisen Bank, 34.500 schillings of relief money were handed in for conversion into banknotes during nine months, involving a profit of 690 schillings due to the 2 % deducted. To which should be added 6 % interest on the 12.000 schillings-equivalent to 720 schilling profit per annum-deposited as cover at the Raiffeisen Bank. Summing these three items, we have an increased annual revenue of over 2.000 schillings, an amount which, in view of the modest financial position of the parish, where the burgomaster has an annual salary of 1.800 schillings, is of some consequence. However, the important indirect gain of the system lies, according to the burgomaster, in that already during the first six months heavy tax arrears, 90 % of these in relief money, reached the parish treasury. The annual arrears in revenue payments, which are stated to have risen from 26.000 schillings to 118.000 schillings between 1926 and the close of 1931, are said to have diminished very considerably, inasmuch as 79.000 schillings thereof was paid. However, for this striking statement, - which has also recently been made in a pamphlet by Hans Burgstaller, editor of the Worgler Anzeiger (Wörgl Gazette), entitled Die Rettung 0esterreichs, das Worgler Beispiel (The Saving of Austria, the Example of Wörgl), - I was unable to obtain full confirmation at the offices of the Tyrolese Government.

A highly placed official, Hofrat Dr. B., whom I consulted, reached the conclusion, on the basis of the departmental documents at his disposal, that the revenue from taxation at Wörgl showed a remarkable rise from 1931 to 1932. Thus the income from the amusement, advertising, and dog taxes rose from 5.300 to 5.900 schillings; those from supplements to the ground tax from 16.500 to 28.570 schillings; those from supplements to the house tax from 14.170 to 23.560 schillings. These are increases which can only be accounted for by the payment of arrears; but they are not as substantial as those cited by the burgomaster. During the same period the portions relating to the federal taxes fell from 57.000 to 43.800 schillings and those relating to the provincial taxes from 31.900 to 17.100 schillings. A rise in the income from parish taxes has undoubtedly occurred; but its real extent could only be settled on the basis of an exhaustive examination of the parish accounts by an impartial accountant. Unterguggenberger declares that not only were the tax arrears discharged, but that the newly imposed taxes were rapidly paid, and that, indeed, tax dues have been sometimes paid in advance. This eagerness to pay taxes may be, in my opinion, simply owing to the fact that the business man who finds at the close of the month that he holds a considerable amount in relief money, can dispose of it with the greatest ease and without loss by meeting his parish obligations. A change of attitude has manifestly taken place. If formerly the paying of taxes was deferred to the last, now it occupies first place. It would be therefore highly desirable to inquire whether, parallel to the increased tax payments there is not an increased indebtedness towards other creditors, e. g., towards the suppliers in Innsbruck and Vienna. I have no data bearing on this problem. I only gathered at the Raiffeisen Bank that after a passing increase in August 1932, the savings deposits remained approximately at the former level, which is not a bad omen seeing the general downward trend in 'the economic situation. It is significant that the Reiffeisen Bank accepts in deposit relief notes at their face value, provided that the depositor agrees to accept relief notes in repayment.

e) Productive Relief Works.

Thanks to the various sources of revenue above indicated, and thanks also to subsidies from the Productive Unemployment Fund and a relief credit of 12.000 schillings from the Tyrol Government, the parish was enabled to carry out a far-reaching employment scheme. The drainage system in the main streets was improved; the streets were repaired and in great part asphalted. The Railway Street was lighted in an up-to-date way. On the most favourable site, to the south of Wörgl, a ski jumping platform was constructed, where already in January 1933 & well- attended jumping competition took place, jumps 60 metres long being reached. The parish mill was furnished with a new wash-house and timber shed, and a new public kitchen was built. The total expenditure on these relief works has been estimated at about 100.000 schillings. The wage payments involved here were exclusively made in labour certificates. That those works, apart from the employment they provided, are of permanent value to the parish, is certain. Special significance attaches to the asphalting of the main street which was as well known as it was held in disrepute. An inscription on a house in Wörgl still recalls this sorry state: " Dah grosste aller Laster, ist, Wörgl, dein Strassenpflaster! " (Thy worst enemies, oh Wörgl, are thy ill-paved roads !) The removal of this drawback is said to have led to a marked increase in tourist traffic. ( 1 )

According to the burgomaster, not only has the parish treasury benefited by the depreciating money, but the more rapid circulation of the Wörgl money has invigorated the local economic life generally and has acted as a thawing agent of all kinds of frozen debts, bringing work and bread everywhere. This conviction is shared by the whole population of Wörgl.

f) Payment of Parish Debts.

Wörgl appears in a less favourable light if we ask how far it is meeting its obligations towards the Innsbruck Savings Bank, of which it had borrowed in earlier years amounts totalling to the immense sum of 1.290.000 schillings, on which 9 % interest is payable to-day. Although at the close of 1931, the savings bank made a reduction of 50.000 schillings in interest arrears, Wörgl was not in a position to meet its obligations in cash. The astute burgomaster invented an original mode of settlement. He passed on to the savings bank diverse parish claims, primarily a claim for 50.000 schillings on the provincial authorities dating to 1927, arising out of roads constructed by the parish, a claim which, after including interest due, is raised to 70.000 schillings. Moreover, the savings bank was presented with a parish deposit book of the value of 37.000 schillings, a practically hard frozen asset. Whether this mode of payment appealed to the savings bank, is doubtful. But Unterguggenberger thinks, consistently with his free money views, that 9 to 10 % interest is a form of slavery which cannot be maintained indefinitely and which will have to be reduced even retrospectively. 5 % interest, he holds, would be tolerable. He believes therefore that he is justified in sinking any available funds in new investments.

( 1 ) At the commencement of January Unterguggenberger furnished me with the following list of productive works undertaken : 1. Rood repairs : Bohnhofstrasse, Brixentalerstrasse, 2 side streets = 6.404 sq. metres constructed or asphalted; Kirchenplatz, principal school entrance = 702 sq. m. constructed and asphalted. - 2. Drains : Jahnstrasse, Brixentalerstrasse, public school, parish hall, mill = 250 metres laid 4 metres deep, 350 metres laid 3 metres deep. - 3. Rood consiruction, re-metalling of roads and streets, steam rolling: Alte Strasse in Lahntal : 1.200 sq. m.; roads to Egerndorf, 2.200 sq. m.: roads at Winkl, 1.300 sq. m.; other roads, 8.000 sq, m.; footpath, Sebastien Spring, Badl new open space, 800 sq. m, -4. Obtaining and preparing of road metal : in Mullnertal and Winkl, about 2.400 sq, metres of different road metal. - 5. Making of concrete kerb stones ; in Mullnertal, 1.600 metres, - 6. Manufacture of drainage pipes : in Mullnertal, 1.600 metres. - 7 Construction of ski jumping platform : 300 labour shifts. - 8. Removal of the old avenue trees to widen the access to the railway station : 32 chestnut trees uprooted; 32 chestnut trees planted at wider intervals of space. - 9. Construction of a new water reservoir at Winkl. - 10. Making of fences. - 11. Enlargement of parish offices : cost of material and labour, 7.500 schillings. - 12. Enlargement of public kitchen, 800 schillings. - 13. Wash-house and wood-shed for mill : 600 schillings. - 14. 'A series of minor repairs : entrance to church, improvement of rooms at power station, etc., 2.000 schillings.

(1) At the instance of the district authorities, the further issue of relief money has had to be suspended, as from the beginning of May. The parish has, as a last hope, appealed against this order to the Administrative Tribunal.

g) Resistance from Without and Opposition of the Provincial Authorities.

Notwithstanding the popularity of the relief money at Wörgl, the experiment has met with opposition from without. Partly from the Social Democratic Party in Tyrol, of which Unterguggenberger is an old member, although he has always insisted that he is not a Marxist. The socialist leaders in Tyrol, as elsewhere will have nothing to do with free money and have often urged the burgomaster to desist from pursuing his dubious policy, for which there is no provision in the Party programme. But Unterguggenberger refuses to be dictated to. Far more serious, however, is the attitude of the Austrian State Bank, which has opposed the issue of relief money from the beginning. It looks upon the issue of this paper money as an infringement of its privilege and has urged the authorities to suppress it. Thanks to repeated petitions and appeals to the Tyrolese authorities, the parish has succeeded in averting the putting into force of the prohibition. (1) Juridically the State Bank is within its rights if the Wörgl certificates are regarded as money, although no creditor is bound to accept them in payment. Whether it is necessary or advisable to stop this experiment, is another question. A Tyrolese official of high standing, who is theoretically an opponent of the free money theory, doubts this. He describes the depreciating certificates as a kind of parish bonds bearing no interest and which are subject to a disguised 12 % turnover tax. As he has stated the matter in a memorandum to the authorities, he sees in the Wörgl self-help effort a welcome sign of the revival of the collective spirit and recognises its beneficial effects. He only criticises the cover, which he deems insecure. The deposit of 12.000 schillings should, in his opinion, be withdrawn from the Raiffeisen Bank whose assets are already three-fourths frozen, a state of affairs which endangers the deposit and thus the cover. The latter should be deposited in an Innsbruck bank or at the State Bank in a suspense account, where it could not be touched and, of course, would carry no interest. This would prevent a multiplication of the means of payment and exclude all inflation. If Wörgl agreed to this proposal, he could see no good reason for insisting on the suppression of the relief money. In any case, these certificates are decidedly more harmless than the expanded credits of numerous financial institutions which have by no means been so sternly dealt with. (1)

(1) See also an article on " The Wörgl Labour Certificates ", in the lnnsbrucker Nachrichten (Innsbruck News) of 27 April 1932, contributed by a " competent authority ".

h) Further Successes.

A reason which may account for the unyielding attitude of the State Bank, is perhaps the fear of the experiment spreading. On 1 January the neighbouring parish of Kirchbichel, also an industrial commune of about 3.000 inhabitants, began, on its part, to issue depreciating money to the value of 3.000 schillings. The certificates of the two parishes are valid in both places. Four other Tyrolese communes-Hopfengarten-Markt u. Land, Brixen, and Westendorf, localities totalling about 16.000 inhabitants-have also decided on issuing depreciating money, but are awaiting the outcome of the struggle between Wörgl and the State Bank before taking action.

Wörgl has meanwhile become the Mecca of all believers in free money. From every part of Austria, and more particularly from Switzerland, they make their pilgrimage, in order to behold with their own eyes the first, partial, realisation of their theories. A gigantic correspondence, inquiries from all over the globe, lie piled on the writing table of the burgomaster who understands neither French nor English and who has had therefore to institute a special translation service. The well-known American economist, Irving Fisher, is evincing particular interest in the experiment and sent to Wörgl one of-his collaborators at Geneva on a special mission. On the occasion of my stay at Wörgl in April, I met, among others, a lady lecturer in economics at Yale, with whom I visited many shops. Even astrologers take an interest in Wörgl. They desired to know the exact date of birth of the burgomaster, which falls on 15 August 1884. They drew his horoscope and declared that-having been, naturally, born in the sign of the lion-his strenuous efforts would be eventually crowned with success and that, owing to a special constellation of Neptune, he was destined to overcome metallism. Unterguggenberger is highly sceptical as regards these revelations.

i) Conclusions.

That the stream of inquirers is economically advantageous to Wörgl, is self-evident. But equally important is a purely psychological aspect. The inhabitants of Wörgl are conscious that steps are being taken in their parish to check the trade depression; that it is not simply a question of being resigned or hoping for help from the State (indeed, the State Bank appears here rather as the mischief maker); that, in fact, the world is watching Wörgl and that serious thinkers side with them. All this impart a moral strength to the population. Here is an irrational element which a purely economic inquiry is apt to ignore, but which yet has a decided bearing economically. An impartial investigation must therefore admit that the experiment has been advantageous for Wörgl. Who are the victims? One is tempted to say that it comes to this that the manual and clerical workers, and particularly the shopkeepers, gladly agreed to suffer small losses, losses which eventually proved to be gains for the parish treasury. But here we have only a half- truth. It overlooks the fact that the parish does not consist of a few officials only, but of the whole of its inhabitants, and that all would be victims if the parish became insolvent. It is therefore likely that the small sacrifices demanded were economically justifiable. In this connection consider the productive works discussed above and, more especially, that the asphalting of the main street would have been impossible without the depreciating money, note also that the numerous improvements benefited all the inhabitants, particularly those who had shops in the main street.

It is more than doubtful whether the heavy debt owing to the savings bank at Innsbruck would have been more rapidly repaid if relief certificates had not been issued. A partial utilisation for this purpose of the larger income of the parish (due itself to the depreciating money)-which at first sight might seem reasonable - was impossible, it was contended, as the one object was to bring relief to the parish and its inhabitants. Relief money had to be spent on relief measures. Besides, the shopkeepers were presumably enabled to pay their tax arrears because, owing to the sinking of 100.000 schillings in new works, their economic position had improved. The immense indebtedness of the parish is to be deplored, but this is chargeable to earlier times and is unfortunately too common with Austrian local authorities. Wörgl does not stand alone in Tyrol in the matter of being in arrears with interest payments.

There has been undoubtedly an increase in notes. According to current views on finance inflationary effects were therefore inevitable, apart from whether these supplementary credits were spent on economically justifiable or unjustifiable undertakings. This is a conception which many challenge. But, in fact, a rise in prices has not taken place at Wörgl. That the new investments' were economically sound, is also probable. And the theorists, who condemn all increase in money, might be told that the experiment at Wörgl could well have continued successfully even if the Innsbruck official's proposals as to cover had been accepted. It is therefore quite possible that the strictest scrutiny (which should also inquire into the extra-local indebtedness of the shopkeepers) would lead to the conclusion that there were no victims at Wörgl. Here we should have, then, the miracle that economic values may be created out of nothing. That appears impossible; but only if useful ideas, a good organisation, and a determined collective spirit are to be regarded as economically valueless, a conclusion which may not be the last word of economic wisdom.

Rash conclusions concerning the value of the free money theory, built on the Wörgl experiment, should be avoided. Worgloperates at present with two currencies, one of which, the depreciating schilling, is, in the last resort, covered by the statutory schilling which, in turn, is based on the rapidly dwindling gold reserves of the State Bank. How things would shape if a community used only depreciating money, the Wörgl experiment, I think, does not reveal.

According to the universalistic teaching, money is graded in value. The highest grade would be represented by the banknotes of the State banks; the next, by bills, cheques, and the book entries of the leading banking and other firms. But the Wörgl labour certificates are a creation of money of the municipal grade, which is guaranteed by money of the higher and highest (banknote) grade. The Wörgl experiment proves that such a creation of money may in exceptional circumstances prove of considerable advantage to a given locality. (Translated by G. Spiller, London.)

Reprinted by permission from Annals of Collective Economy, Geneva, Switzerland, 1934.