Fritz Schwarz Report

8/4/2019 Fritz Schwarz Report

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The story of WörglAs told by Fritz Schwarz, and translated by Heinz Martzak-Goerike and prepared and shortened for theinternet by Hans Eisenkolb, and with some English language usage modified by Cal S.

Acknowledgement.

All of this work is leaning heavily on the work of Fritz Schwarz about Wörgl. Most of it is onlytranslations of his and I hope that he will forgive, wherever he is, the snotty young fellow he met inWörgl 1951 when he was writing his book, that he cuts it to the bone for the internet. It took him a longtime to realize the immense value of it and now he is using it shamelessly.

Without Fritz Schwarz we would not know, what exactly was done in Wörgl and would not be able tolearn from it what we must learn when we want so repeat and improve another such experiment.Especially the „Banknotenausweis“ which is the used amount of the money of Wörgl which was soridiculously low shows exactly what is wrong with our age-old money and how much better the moneyof Wörgl worked.The highest amount ever in circulation was 7,443 Schillings! Average about 5,500.

Michael Unterguggenberger lives through the world economic crisis as mayor of Wörgl.

Wörgl is a small town whose population had increased from 648 1900 to 4427 when just after the war Michael Unterguggenberger was elected into the council of the town. Soon he became deputy mayor and in 1931 mayor. Building the courthouse road, the secondary school and the extension of thefreshwater net and the supply of Wörgl with electricity were the outcome of the good development inthe happy second half of the 1920‘s with stable price level up to 1929.

Then came the Black Friday, the fatal 24th

of October 1929: the great crises and thereby the night over Europe. Up until today we are still suffering from the consequences of that crises which an expansion of the experiment of Wörgl could have ended.

One can imagine what a crisis in his small town meant for a man like Michael Unterguggenberger,somebody who had personally experienced the condition of the not o wealthy and knew what the crisismeant for a person who depends solely on his or her income, which is barely enough in the state of being fully and permanently employed. At that time Wörgl had a population of 4216. Being a railwaynode the railway employed many people: in 1930 the figure was 310, but 1933 the number had comedown to 190. In the wake of that the newly unemployed came one after another to their former colleague, who had become mayor and asked for help. Already in 1929 the service facility for steamlocomotives was closed following the transition to electric engines. Then followed the cement plant inKitzbühel: in 1930 there were still 45 to 60 workers employed, in 1933 that figure had shrunk to twoworkers. There was also the brewery Zipf which contributed to the unemployed score 10 to 14 workersfrom the original crew of 33 to 37. Then there was a cellulose factory which had in 1930 still employed360 to 410 workers. In 1933 only 4 men had an occupation there, guarding the idle machines. Thefarmers which accounted for about a third of the working population, could barely sell their products atdepressed prices and the remaining two thirds of the work-force, consisting of blue collar and whitecollar employees plus people running small enterprises considerably suffered from these bleak circumstances. Daily came the unemployed and especially also the increasing number of unemployedwith expired insurance benefits to their mayor. In 1932 there were already about 200 expired benefitscases which thereby became customers of public charity schemes.

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In the spring of 1932 the count of unemployed was 350 in Wörgl proper alone and 1500 in theimmediate surroundings.

However in Vienna the federal government and the president of the Central Bank, Dr. Kienböck wereidle and watched helplessly.

Unterguggenberger consults „the natural economic order“ by Silvio Gesell. Again and again he wasreading: „An economic crises, that is a falling off in sales and unemployment with all attendantsymptoms, is only thinkable when prices recede. The solution. The prices must never be allowed to fall.So Unterguggenberger started to win over people. He went from person to person until he could hold adecisive session of the Welfare committee in Wörgl. After a long preparation of every single member of the committee he invited to the session. It was on the 5 th of July 1932. According to the session report present were:

Mayor Michael Unterguggenberger, retired official of the Austrian state railway, Deputy Mayor Josef Gollner, merchant, Deputy Mayor Josef Balser, official at the State railway, the councilors Jacob Astner jr, farmer; Johann Astl, member of the regional government, electrician; Franz Danek, merchant; AloisKogler, official of the state railway; Oswald Koller, electrician; Peter Lanzinger, retired railway

official; Sebastian Mitterer, baker; Rosalia Nestler railway officials wife; Georg Opperer, retired;Johann Payer, farmer; Franz Pick, railway official; Martin Pichler, member of the regional parliamentand tailor; Thekla Sittenthaler, railway officials wife; Dr.Georg Stava, retired regional governmentofficial; Max Steinbacher, private person; Johann Straber, farmer; Christian Wascher, carpenter; FannyWeinmayr, railway officials wife.

At the beginning the mayor gave a short summary report about the current situation as seen from thelocal government viewpoint: In the town area proper live close to 400 unemployed and 200 of those areexpired insurance benefit cases, adding the nearby villages the unemployed total is 1500. For an amountof 1,300,000 Schillings, which the council owes to the Thrift of Innsbruck city, the interest can’t be paidany longer - the interest amount in arrears from the year 1931 is 50,000 Schillings. Unpaid taxes are the

only credit amount the council has to its discretion; these amount to about 118,000 Schillings for theyear 1931. Now in 1932 it is nearly impossible to get anything in of that money. Due to these backlogsthe town is also in arrears towards the regional government. These two bodies pay a percentage of theregional and federal taxes that come from a town back to this town. Accordingly they don’t disburseanything to the town if no taxes are coming in, thus even that income source is shut down for the town.The local taxes paid for the first half of the year amount to just 3,000 Schillings. The situation of thetown is getting worse, as nobody can pay the taxes. The worker has to access the last thrift penny. Thelocal savings bank suffers from shortage of money. At auctions the purchasers are absent becauseeverybody looks forward to further falling prices. All the payments are stalled. The number of unemployed in these circumstances rises daily. So far the report about the situation is bleak!

Then the mayor submits to the welfare committee the subsequent layout of his proposals, the details of which were not new to all of them, since he had gone over these with them in countless conversations.So, he reads out now this:

DISTRESS RELIEF PROGRAM .

Slow circulation of money is the principal cause of the existing lameness of the economy. Money as amedium of exchange vanishes more and more out of the working peoples hands. It seeps away intochannels where interest flows and accumulates in the hands of a few people who don’t feed the money back to the market for commodities but withhold it as means of speculation. As money is anindispensable wheel in the machine of production, an accumulation of great sums in few hands means agigantic danger for the undisturbed production process. Each instance of the money flow being jammed

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causes a jam in the flow of commodities and employment. Uncertainty about the state of the economymakes the owner of money careful, he or she doesn’t spend the money or only reluctantly. He or shedistrusts each investment. In that way the circulation of money is slowed down, the total turnover of goods and services shrinks and the places for people on the wheels of the economy disappear. If thisstays in that way, it paralyses the motivation of the population, peace and wealth are being destroyed.Thereby whole nations and states are under threat of ruin. As the whole world can’t be liberated by our place, we want at least to give a sign.

The sluggishly and slowly circulating money of the National Bank has to be replaced in the area of Wörgl by a circulating medium which performs better as a medium of exchange compared to theordinary money. „Certified value of work vouchers“ shall be issued at three nominal values and put incirculation (1, 5, and 10 Schilling denominations). The council will do that and the agreement of the public shall be obtained to accept the Certified value of Work Vouchers at their full nominal value anduse them to pay with at as many as possible occasions. In order to turn around the economic life in thetownship also public works, which are about to be planned, shall be done and paid for with CertifiedValue of Work Vouchers.

The issuance of that „Money“ in Wörgl.

Now these vouchers could be issued. 32,000 Schillings nominally had been printed; 2000 of 1 Schillingeach, 2000 of 5 Schillings each and 2000 of 10 Schillings each. Even before the „Money“ got in thehands of the welfare subcommittee the Austrian National Bank protested and claimed that is money thatis printed there and that violates the banknote monopoly which belongs only to the National Bank in

Vienna.The mayor of Wörgl answered that these vouchers were not money - only papers certifying value of work done. While saying that he smiled, as he knew, if the term „money“ is introduced into discussionall theoreticians involve themselves and never come to an agreement what „money“ is, and whether these Certified Value of Work Vouchers are money or not. Until that is settled the controversial moneyis circulating in Wörgl! An exactly that happened.

On 31st of July 1932 the small town administration purchased the first lot of vouchers from the WelfareSubcommittee, total face value of 1000 Schillings and used them to pay wages. The 1000 SchillingCentral Bank money which the Welfare received for the vouchers were deposited at the local bank „Reiffeisenkasse“. Thus the treasury of the town was ready for selling the vouchers and these could beexchanged back at the local bank as per the program orders.

The text on the vouchers.

TO ALL,

Slow circulating money has thrown the world into a tremendous economic crisis and millions of hard-working people into dreadful suffering. The demise of the world from pure economic viewpoint showsits terrible beginning. It is time to save the downward rolling economic machine with sound recognitionand determined action, so that mankind isn’t driven into brother-wars, confusion and disintegration. The people live by exchanging their goods and services. The slow circulation has severed the exchange of goods and services to a great deal and thereby millions of citizens, willing to work, have already lost

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their sphere of living in the economic realm. Therefore the exchange of goods and services has to beincreased again and the sphere of living regained for those who have been already deprived of it. To thisend the certificates of work done notes of the small town of Wörgl are issued:

IT ALLEVIATES THE MISERY AND GIVES WORK AND BREAD.(Remark of H.E.: And it did, but only for the short while of a year, Then it was stopped by what one canonly call evil forces.)

AN ANECDOTE!

The first paid out wages in the amount of 1000 Schillings returned almost on the same day to the coffersof the community: taxes were being paid! On the third, somebody comes running and loudly says: „Mr.Mayor! Our Value of Work Vouchers has been falsified. We have only issued 1000 Schilling so far,however, the amount of overdue taxes paid with these reached already 5,100 Schilling! Somebody musthave forged the vouchers!“

The Mayor smiled in a forgiving way. He knows that other men at a somewhat higher echelon willmake the same mistake. But that even Professor Dr. Bundsmann, lecturer for macro-economics at theUniversity of Innsbruck and honored with the Austrian title of „Hofrat“ will call the success of the smalltown of Wörgl with its well circulating money a hoax because he could not understand how one can pay5100 Schilling in taxes with an amount of 1000 Schillings issued so far - that the Mayor of Wörglcertainly would not have considered in that moment. Every Schilling which came in as voucher wasright away paid out and used to pay a bill - and is back in short order - and is already gone again because this money attracts a penalty when it is on strike.

At that time the National Bank in Austria kept at any point in time during a year an average of 914Million Schilling in circulation for a population of about 6 Millions, that makes 153 Schillings per

person. At the peak of issuing the value of work vouchers were 7443. Not even 2 Schilling per person.But these 2 Schillings per person enabled more income and profit than the 153 Schillings of the National Bank. Why? Because this money prompted the people to use it for was it has been made for: to pay, to do business, to exchange.

A. Hornung, who was opposed to this „free money“ and the experiment reported against his will andgrudgingly: „The issued plight relief money was mainly already after a few days again in the coffers of the commune an could be used again for payments. The total average in circulation was:

August 1932 3675September 3375October 3525

November 6350December 5725

January 1933 5450February 5650March 5625April 5750May 5675

June 5875 July 5800August 5825September 5825

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How ridiculous - that is what people think who have no inkling of the importance which the moneysvelocity of circulation has for the economy (Remark of H.E.: People includes economists) - howridiculously small were these amounts. But what has been made possible by these paltry sums? With thehelp of the incoming tax arrears, which now could be paid, with added money from the unemploymentfund and from a federal relief loan of 12,000 Schillings the envisioned program to create employmentcould be realized. The originally planned amounts could be surpassed even.

(Remark of H.E.: All of this - about 120,000, not including the wages of the city employees - was onlyabout 7% of the overall generated trade. The total was in the range of 2.5 Millions and this sum was the guess of Dr. Horning, surely not a friend of the experiment.)

What do the eyewitnesses report?

One report was written by a master engineer from the Technical University Zürich, Claude Bourdet. Hewrote an article about what he saw in Wörgl:„ I have visited Wörgl in August 1933, that was exactly one year after the launch of the experiment.One has to acknowledge that the result borders unto the miraculous. The roads, which had beennotorious for their dreadful state, do match now Italian Autostradas. The Mayors office complex - beautifully restored, made pretty, a charming chalet with blossoming Gladioli. A new bridge made of

concrete carries the proud inscription: „ Built with Free Money in the year 1933.“ (H.E remark: Not anymore!)Everywhere one sees the new streetlights as by the street named in honor of Silvio Gesell. (H.E remark: Name long changed) The workers one meets at the numerous building sites (H.E. remark: No morebuilding sites two months later) all are zealous supporters of the Free Money system.I was in the stores: everywhere the value of work vouchers is being accepted as equivalent to the officialmoney. The prices did not go up. Some people meant that the system of the Wörgl experiment preventsthe formation of equity and would be just a hidden new kind of exploitation of the taxpayer. Apparentlythere is a little error involved in that view. Never before one saw the taxpayer not protesting with anyenergy left when she or he had to part with her or his money. Then and there in Wörgl, nobody was protesting. To the contrary, taxes are paid in advance; people are enthusiastic about the experiment andcomplain bitterly that the National Bank is opposing the issuing of new notes. It is impossible to credit

only a „new form of tax“ for the general improvement of the situation in Wörgl. One can rather agreewith the Mayor in the opinion that the new money performs its function far better than the old one.I leave it to the experts to establish if there is inflation despite the 100% cover. Incidentally an increasein prices, the first sign of inflation do not occur in any way.As far as saving is concerned one can say that the new money favors saving properly at the expense of hoarding money. Id had become a big disadvantage to lock up money at home. However one can avoidthe dwindling by simply depositing in the savings bank.Wörgl has become a kind of destination for pilgrimages from macro-economists from a variety of countries. One can recognize them right away by their learned expressions when they discuss in the beautifully maintained streets of Wörgl or on the restaurant decks. Wörgl’s population, proud of their fame, receives them favorably.“

Quite some insights one gets also from the reports of the elected councilor of Bern, Fritz Pfister.Together with a teacher he interviewed various businessmen and persons about the new money andrecorded there and then on paper what they told him. The following summary was published in themagazine „Geld und Arbeit“ 1933.

How the population sees the money reform.

We went in Wörgl from house to house and from shop to shop and asked the people using twelvequestions.

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1st question: In your opinion was there any option other than this money reform in order to come out of the difficult situation?

Director: The commune had no other way to alleviate the crisis.

President of the alliance of craftsmen: As the commune had already taken a mortgage oneverything eligible for that, there was no other way to help. If we did not have that money, therewould be no business activity left.

Police constable: The only thing which could help Wörgl would be relocating a state agency toWörgl. Otherwise there is no future for the commune.

Clergyman: With the good revenue in taxes new motion came into the measures to ease thecrisis. The commune couldn’t do anything else.

School principal: The commune was in a bind without escape.

Tin-smith: Absolutely no other choice.

Taylor: No!

Owner of department store: Something else was not possible.

Pharmacist: No, else we would not have taken this means.

Wholesaler for beer: No, the commune was ridden by unemployment virtually overnight. In thissituation this money eased the situation considerably and opened the door for work-projects whichwould not have had a chance otherwise.

Medical Doctor: Actually, no! It was a very good idea.Owner of cinema: Not really.

2nd question: What has been expected from the reform action?

Director: Possibly the council was expecting more from it, but the fear that was instilled by therepeated injunctions forbidding the action, prevented a bigger success.

Clergyman: It is possible that one was expecting a bigger success.

Small shop owner: The overcoming of the scarcity of money - and that was archived also.

3rd question: How did the people view the security of that money?

President of the association of Craftsmen: Most people accepted it without reservation. In my viewit is completely safe and I would regret if it disappeared again.

Police Constable: At first I had doubts. There was one burglary where the thief took only theAustrian Official money, but threw away the Wörgl money. He must have been a stranger, since aperson from here would have taken it.

Clergyman: There was no doubt about the security of this money, because one knew that thecover was fully certain.

Taylor: I did not know that such a money would be issued, however I accepted it without qualms.

Small shopkeeper: Without reservations in view of the good cause. The monthly fee and the 2 percent loss if one sold that money went to the Welfare fund for the poor.

Shoemaker: That way again, one had money and had some maintenance done, which would nothave been possible on the dole. And on does not loose with that money because the commune

readily exchanges it back.Pharmacist: All in all without resistance. The business people accepted particularly in view of thecompetition when even posters were in the shop windows saying: „Plight relief money acceptedhere.“

Wholesaler for beer: A third of our income is in form of plight relief money. That money circulates.Each deal becomes possible. That was not the case before.

Medical Doctor: Overall it was accepted well. Only business people who had a high turnovershowed some reluctance.

4th question: Did you use that money for purchasing commodities or did you exchange it for officialAustrian money?

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Pharmacist: Per month 100 to 200 Schillings of my income were Value of work vouchers. Thisplight relief money does not disturb the business at all.

Merchant: I have noticed the upsurge in business very clearly an used more than half of thesevouchers to buy goods and cover other expenses.

Administrator: In case production in our factory starts again we would not hesitate to buyvouchers from the commune and use them to pay wages to our workers.

Tin-Smith: Some actually has been exchanged for regular Schillings, but otherwise bills an taxes

were paid and goods purchased. I bought commodities and have felt an influence upon the rate of business. The maintenance projects that became possible entailed need for clothing. They cametime, paid with plight relief money, and that way I could again pay taxes and for light and water.

Owner of department store: For the major part goods were purchased. That is the essentialadvantage! The money stays in the community; there are no crummy deals. The local merchantbenefits from it. The 2 percent fee when vouchers are exchanged for regular money can berecovered because due to having the money ready to pay, instant payment discount can be had.

Medical Doctor: When I have plight relief money I give it to my wife so she can bring it to thebaker or small shop,

5th question: With which attitude was the population taking the money?

Tin-Smith: Readily. However theoretical understanding is somewhat missing.Owner of department store: Without reservations.

Wholesaler of beer: Well accepted, even the innkeeper in Kundl.

Owner of cinema: I take it readily. When project work in January was ending 10 percent of myrevenue was in vouchers. At present it is already 24 percent. Certainly my income has risen justbecause of the vouchers from people who would not have come otherwise.

Merchant: With the ordinary money it often happened that people, who were actually havingenough to pay their debts, let the merchant wait, just to cash in on interest from the savings bank.

6th question: Do you believe that an extended circulation or an expansion of the area beyond the limitsof the commune would be desirable?

Clergyman: The success would be certain in case the area is extended.School principal: Maybe the account transfers would produce difficulties.

Administrator: A larger circulation would achieve a good success.

Director: In case of an extension of the area a good success could be expected.

President of the association of Craftsmen: There is no doubt about the success in case of anextension of the area.

Police Constable: An extension of the area certainly would bring good success.

Tin-Smith: Yes, if all participated.

Taylor: Without any reservations.

Owner of Department store: Very certainly.

Pharmacist: Yes. The success was already in the small circle much bigger than I imagined. Before,I was very skeptical and was surprised afterwards how the taxes came in despite the difficulttimes.

7th question: Do you consider the results achieved a success?

Merchant: I look at the action as evidence that Free Money is viable and an advantage.Director: From my view the action is a success. If the Mayor can get his intentions into realization

he will certainly be in a position to get many more works done for the community.

President of the association of Craftsmen: The success cannot be argued away.

Police Constable: Overall it can be considered a success for sure.

Tin-Smith: Quite certain, it was a surprising success.

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Owner of Department store: Yes, particularly because the circulating sum is actually rather smalland the community has only about 4000 inhabitants.Pharmacist: Certainly.

Wholesaler for beer: Absolutely.

Medical Doctor: Yes. The whole action can be looked at favorably. I don’t understand why there issuch a big resistance from the government.

Owner of cinema: For sure. One can see that something has been created.

8th question: Did you hear complaints?

Medical Doctor, Owner of cinema, Merchant, Director, Clergyman, Administrator, President of the association of Craftsmen, Police Constable, Taylor, Owner of Department store: No.Director, Wholesaler for beer: The stamps should stick better.

9th question: With that money, were there any commodities bought within the community whichotherwise would have been purchased from further away?

Director: Certainly people have bought commodities in the community with the vouchers, whichotherwise would have been gotten from out of town.

President of the association of Craftsmen: One cannot determine if this is the case.Medical Doctor, Owner of cinema: I don’t know anything about that.

Owner of department store: I don’t know for sure, in any case, with that money, one can onlypurchase within the perimeter of our community.

Pharmacist, Wholesaler for beer: The money stays within our community.

10th question: Can you make suggestions for improvement?

Wholesaler for beer: The paper is somewhat low quality.

Pharmacist: I would suggest to charge 5% when the vouchers are changed back to regular moneyinstead of the 2% that is being deducted for that now.

(All the other interviewed persons were contented)

11th question: Are the business transactions being made more difficult by the money with stamps?

Merchant: Not in the slightest way.

Businessman: My original fear, that it will get complicated, was not warranted.

Tin-Smith, Taylor, Owner of department store: No, not at all. It is actually money like any other.

Pharmacist: The transactions are going completely smooth.

Medical Doctor, wholesaler for beer: No.

Owner of cinema: Not in the least way, only an increase in the business volume became evident.

12th question: What is your view about the Wörgl Free Money being forbidden?

Director: In case the Mayor can get his intentions implemented he will be able to get many moreworks done. Instead of forbidding this, it would be better to continue it in a larger area.

President of the association of Craftsmen: I am decidedly against the injunction stopping it. Rathergoing to prison than discontinuing the action.

Clergyman: I am against the prohibition of it. With the plight relief money the industry could berevitalized.

Administrator: I am against a prohibition of it.Tin-Smith: The prohibition will be a disadvantage for us. So far nobody had any loss. Until then

there was only talking. Our Mayor now has acted and did not only talk.Taylor: I want it continued. The thing is so simple that a little schoolboy can understand it.

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Owner of the department store: There will be not much that can be done against it. From theviewpoint of a businessman the plight relief money can only be seen favorably.

Wholesaler for beer: The prohibition would be a big disadvantage for Wörgl.

Medical Doctor: Forbidding it would be stupid as nobody is getting harmed.

Owner of cinema: The Mayor is a clever person; he manages not to get tripped and caught. At thebeginning of this year I had the choice between three cinemas, in Kundl, in Kirchbichl and here.I have been warned that there is plight relief money. I thought that something could be gottengoing here, and exactly for that reason opted for Wörgl.

Fritz Pfister writes then in conclusion: „As one can see, nobody in Wörgl rejected this action. All thedecisions relevant for it were made unanimously in the council. Nevertheless we want to mention onesingle exemption: An elderly man of about 60 years of age with conspicuous horn spectacles arguedloudly. However we did not really get what he had against the action. When we afterwards asked thePolice Constable for the name of this person he tapped twice with his index finger on his forehead in ahighly significant way and smiled while shaking his head.“

Remarks of H.E.

Significant answers:3rd question: Wholesaler for beer: THAT MONEY CIRCULATES:6th question: Medical Doctor: BIG RESISTANCE BY THE GOVERNMENT..12th question: Taylor: ...SIMPLE THAT A LITTLE SCHOOLBOY CAN UNDERSTAND IT:7th question: School Principal: MAYBE ACCOUNT TRANSFERS WOULD PRODUCEDIFFICULTIES.Especially the answer of the School Principal is highly significant because it shows that accounttransfers were made. This infers that the local bank gave people a choice. They could exchange at acost of 2% or leave the vouchers in a voucher account until transferred. For not transferred sums on theend of the month it surely charged their account holders the monthly fee of 1%. The bank would not payit for them. It surely were not large sums kept over the end of the month, therefore this fact was alwaysneglected, but it shows that „bookmoney“ was possible. The arguments of the „bookmoney“ freakstherefore hold no water.

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Documents

Fritz Schwarz Report