Does Wörgl show us how to arrest the demand for continual growth?

It was Steve Keen who (for me) pointed out that of the three uses of money viz: a unit of account, a means of payment and a store of value, the last two are in conflict.

He commented on the the inbuilt depreciation of the Wörgl local currency in that it expired by 1% monthly unless you affixed a stamp purchased in the national currency to the (local) note in order to retain the Wörgl currency’s full value. Effectively this 1% tax on the held money at the end of the month made any motivation to hold onto the money disappear. Rather, to avoid the monthly tax, the motivation became to spend the currency in as useful and rapid a manner as possible. in a new tab)

The stamps are shown in the image below:

What is interesting is that in ‘Job Guarantee’ terms Wörgl reduced unemployment from around 30% to around nil!

What is not to like?

Well the Austrian central bank didn’t like it and legally challenged it eventually establishing that it should be shut down. And in September 1933, just thirteen months after the scheme had started the central bank succeeded – they didn’t want the competition to their own authority …

Now this whole episode indicates that a depreciating currency encourages economic activity – and although this is almost a century ago I think we need to consider whether it has implications for local currency creation and for the concept of ‘growth’. No infinite growth but straightforward stability.

Doesn’t declining saved monetary value lead to a proper consideration of purpose? After all if money were lent at nil interest, which would give the banks their ‘margin’ if they were taxed at 1% on their reserves/cash holdings (in this era of ‘Quantitative Easing’), no additional monies would need to be created for the system to continue functioning. Unlike now, where growth of money supply is always required.

I have to wonder whether this would serve to damp down those widespread and ‘everlasting’ growth prospects?

Although nil or even negative interest rates are common, they are very unusual for borrowers.

I’m beginning to wonder if this could be key to reducing the continual demand for growth?


  1. B. Gray -

    One of the reasons for a growing money supply (at least through fiscal expansion) is to accommodate savings preferences of the private sector; the so called “paradox of thrift”. Governments increase deficits when the private sector decides to increase savings, as during recessions. Broadly devaluing currency to promote spending and reduce money hoarding would also seem to punish savers. Wouldn’t the money supply still need to expand to support retirees/pensioners? The Worgl experiment had the desired effect over the short term, but it seems the long term effects are largely unknown.

  2. Gerry Toner -

    Mr Unterguggenberger wanted to discourage saving, that is the point. Saving is waste, full stop. I think it is MMT and people like Steve Keen, Richard Murphy et al who remind us of such waste. We have a duty to use our socially constructed resources to sustain the vitality of our societies. Savings in our current finance led system is a rent seekers scam. Bankers as was the fate of the Worgl, do not want to stop saving, the flow of rents. The Worgl says we must spend, and all take the risks. Banks say save and the public takes the risk.
    In any event what a name!

  3. Jim Osborne -

    I have to disagree with Gerry and I doubt Richard Murphy is of the view that “saving is waste”. Saving is necessary to build “redundancy” into the economy and society – this is essential for resilience at all levels. Folk who have lost everything in floods in recent years will appreciate why “redundancy” is necessary – because if the were insured (and insurance is an example of redundancy) they could get back on their feet. Those without insurance – well I don;t think I need spell it out. The issue isn’t savings per se – the issues to focus on are (1) the distribution of savings (2) the purpose to which they are put. I am pretty sure Richard Murphy supports saving because that is what his “green bonds” proposals for funding the GND involve. This is also completely relevant to why we should all be concerned with how pension funds are used – for financial asset speculation and not investment in production of all the things we actually need.

  4. Gerry Toner -

    Jim reading you comments leaves me unsure what your objection actually is. As a dynamic system the economy generates valuable products / work. If one actor reserves a proportion of that output as ‘saving’ it is wasted and is immediately acquiring ‘redundancy’, as it is removed from its role within the dynamic whole. Banks claim to invest savings, but mainly in other financial asset strategies. Banks do not reward the saver but exploit the saver. Saving thus from the saver perspective is a negative. From the whole system perspective saving does not create value, it does growth asset values for some. As you seem to indicate it is preferable that we invest in productive activity, than in speculative [asset based] activity. Productive activity cannot include ‘saving’.

    1. Peter May -

      But there is currently a need for savings as most of us want rainy day money particularly as the state as it now is, chooses to limit ‘welfare’ money so most would definitely need to save if they could in the absence of proper welfare or decent insurance support.
      I wonder – I haven’t thought this through but should there be two currencies in the country one of which is local and has demurrage and one of which doesn’t?…

  5. Jim Osborne -

    First off Gerry misunderstands the meaning of “redundancy” – it doesn’t mean “taken out of use” which is its colloquial meaning -I should have use the term “contingency” or “resilience” to avoid any confusion, because that is what it means in this context. Every society that wants to survive external shocks has to provide for contingencies – pooling risk. A state with its own currency can always provide that by creating new money when required but the problem with that is it requires a centralised, command and control state which presents risks for democracy and it also creates a dependent citizenry. With its own currency the state can always provide the means for saving – by issuing bonds. IMO not only CAN the state do this, it SHOULD do this. (MMT says it doesn’t need to do this to fund public spending and that is true but MMT also concedes that it can and does do so to offer a safe mechanism for private saving). Doing this means that at every level of society there is a means of reserving a portion of the fruits of production for “a rainy day”. It creates the economic conditions for “subsidiarity” to flourish – distributing power and assets to the lowest possible level in society. As Peter muses, it also creates the potential for local currencies to develop – not in competition with the national currency but in parallel, and complementing it; they would be convertible to the national currency. Any local currency also supports greater self reliance and local resilience but ultimately has to be backed by the national currency. As I said last time the important issues to address are the distribution of savings (tackling inequality) and using savings for productive purposes.

    1. Peter May -

      Good point about ‘subsidiarity’ – a good EU concept and one this current UK government has probably never heard of!
      Local currency could be backed by local taxes it seems to me.

      Councils/devolved governments would probably initially have to issue it to complete specific projects they would not otherwise have the money to do, but gradually it would/should snowball. I see various French local currencies devalue by 2% every six months, which obviously encourages exchange. I cannot find out if they are valid for local taxes.
      As I understand it Worgl was backed by a bank deposit in Schillings and the demurrage at a penny a month I think was what led to its phenomenal ‘velocity’.

  6. Gerry -

    You guys are going to get very wet on these rainy days; ‘rainy days’ is an excuse for lazy thinking. It seems Jim does not understand redundancy and now wants to use other words. You guys may be saying the system within which we live is it self unstable, it generates waste, including redundancy which is perpetuated by lazy behaviours called saving. You may decide to use funds in the future for a productive purpose, that is investing. Of course the state would and should ‘do this’; it is the capitalist state afterall, there is no other state. The state is a rent seeker and represents the interests of rent seekers. It removes value and redistributes it unevenly, and despite all the bellowing of the bourgeois left, continues to impoverish people, infrastructure and the environment. That is because these are not financial assets. Saving is a scam for financial asset strategists. Subsidiarity sounds important but won’t boil water. Resources it seems do not in fact flourish at the lowest possible level. Subsidiarity is a hegemonic action to maintain the operating integrity of a predatory system, which includes the EU. What MMT indicates is that the purpose of the ‘economy’ is different from the current financially oriented model, thus, that the current model itself, with its concept of saving is ill-conceived, unless you are a financier. Like Steve Keen, they are using a whole system view of the world, a system receiving external shocks has unforeseen variables to deal with. This is an attribute of your system, so the system creates waste and the system has a back up that is part of the system’s capacity. If it is part of the capacity it is not accessible for your rainy day. Saving for a ‘rainy day’ is waste. It is idle resource not put to a purpose, it means you have excess energy in your system. It is the savings concept that is and should be redundant.

    1. Peter May -

      Subsidiarity may not boil water but if it indicates that decisions should be taken as close as possible to people it is important. I see no reasons at all why resources should not prosper at the lowest possible level – even the failure of national test and trace and the success of local T&T rather suggests it.

      On a theoretical level maybe savings are indeed waste – although they do not need to be if government alone pays interest to individuals – or even to bondholders if in so doing a public purpose is achieved. But maybe that is investing?

      Saving for a rainy day is I suggest, not waste – otherwise food storage in the temples of the ancient world must be so considered. I think that, since we are no longer hunter-gathering on a plentiful savannah, saving is pretty hardwired into a system which relies on agricultural surplus.

      In your contention it seems to me that a surplus is waste.

      In fact what is idle now becomes useful later.

    2. Graham -

      My car has broken down. It needs a new engine which will cost me £1500. I need a car to visit my aged mother who relies on me to do her shopping and for social contact and the occasional drive into the country as she is housebound. I have no savings because savings is waste and is lazy.

      What do I do and more important what does my aged mother do?

  7. Jim Osborne -

    Gerry says “there is no other state” – in the context of his comment that suggests he thinks that the capitalist state is the only possible state. If that is really what he thinks then the rest of his comment is just nonsense. If we cannot replace the “capitalist state ” with a “socialist state” then we may as well just give up – that is the logical conclusion to Gerry’s comment. But we don’t have to give up because the creation of a state and system of governance that embraces subsidiarity is entirely possible – it needs leadership with vision – sadly Gerry doesn’t seem to have one.

  8. Gerry Toner -

    There is no other state, the state is a concept of capital, the modernisation of the despotic / feudal / monarchical form of power that preceded it. If we do away with ‘the state’ it is because we are able; we cannot wish it away. The people are the only governance all else is a pretext/sham form of governance. It is preposterous bourgeois reasoning that promotes the idea of a neutral state. The state exists because the system it regulates is unstable and breeds inequity; thus it cannot sustain itself without recourse to force and the pretext of law. Of course it is nonsense to a bourgeois! The underlying historical dynamic is that everything the modern system has thrown up has been tested by experience as a sustainable system. No State has endured because they are pretexts for the concept of democracy. The political process we indulge in today is a process akin to product renewal as though a commodity, each one is tarnished after a very short period of human years. Obsolescence is built in. Your vision is clear no doubt, but it is inside a bottle floating on history you do not appear to understand. I will not give up Jim, as all of us are valid. You mention, with little substance, the ‘socialist state’, whatever that is. I would view what has been labelled by some as the ‘socialist state’ as nothing but the sham state, in bourgeois left form.

  9. Jim Osborne -

    Gerry – the one floating in a bottle is you I am sad to say. The “state” is most certainly not a capitalist construct – the “state” has existed in various forms since the first agricultural societies emerged in the “Fertile Crescent” and possibly early China (I know little of ancient Chinese history). I am not sure whether you are of Anarchist persuasion or Marxist but if the latter you demonstrate a poor understanding of the Marxist theory of the state. Do you not believe that the Roman empire was the expansion of a state? Or that the powerful “city states” of ancient Greece were states?

    1. Peter May -

      Gerry: Or is the state is responsible for defence and justice – also known as the rule of law? And do we now know currency creation – in order to get stuff done – is also a state purpose?.

  10. Gerry Toner -

    There has always been a source of power in ancient times; an embryonic ‘state form’. There was money in ancient times, there was exchange in ancient times. These were artefacts that emerged and became objectified categories over time. One should differentiate from ‘a state’ and ‘the state’; these are different entities. Rome developed a state[s] and many of the tools and character of what is the modern state in the form of law. Militarism was the source of the Emperor’s power. The modern state benefited from the codification system of law from Rome. Rome grew into that it not possess that at the outset. Rome’s power was the expansion of physical control of land and order based on militarism. The state emerged as capitalism emerged. The state emerged as power and money coalesced to form the fulcrum of capitalism, promoting property and wage labour. In the process it destroyed / reshaped the power structures of preceding eras. Jim I hope it keeps you warm searching for labels. I do not subscribe and I do not conform. Peter it seems is along for the ride.

    1. Peter May -

      Gerry, doesn’t money issuance imply a Central Authority?

  11. Jim Osborne -

    Gerry – I was not seeking to apply a label to you I was trying to work out which body of thought influences your thinking. I assume that you post on this blog because you believe in progressive politics and hope to find a way to create a better world, society and economy. If that is the case then you need to have a serious think about your theory of the state (or non-state).
    If there is no “socialist state” or other transitional form of state to reorganise society and economy in a new non-capitalist way, then how do you suppose the transition can take place?
    Unless you have some concept of the transitional state then it seems to me that you are going to end up reproducing neo-liberalism is another form. Instead of the market and economy emerging spontaneously from the uncoordinated acts of self interested persons which is the basis of neo-liberal economics and politics you are de facto proposing that “mutualisation” of society and the economy will happen spontaneously from the actions of individuals.
    The reality is that the transition to a “mutualised society” “communitarian society” or communism (whatever you want to call it)
    requires a state to organise society and the economy by the creation of money and markets which are governed by new institutions, structures, regulations and laws. These essential conditions for any society and economy to function do not and cannot arise spontaneously.

  12. Michael G -

    More heat than light?
    If I understand it, a Worgl currency is simply the equivalent of issuing bonds at negative interest rates.
    What I don’t see is how it would encourage productive spending, rather than asset bubbles. Yes, a Worgl currency would encourage me to spend, but surely it would simply drive me to keep my wealth in other assets? Land? Gold bars? Bitcoins? It would have exactly the same defects as conventional Quantitative Easing.
    I think Richard Murphy’s wealth tax would be a more promising approach. The more an asset bubble became inflated, the more it would be taxed. There would still be major problems and unfairnesses, but perhaps they could be resolved?

    1. Peter May -

      Not quite bonds at negative rates because it’s local spending money and in 15 months it managed to reduce local unemployment from 30% to nil…
      Your wealth would indeed have to be kept in something else, but that doesn’t necessitate asset bubbles – I’m not suggesting that taxation should cease!

Write a reply or comment Comments Policy

Your email address will not be published. Required fields are marked *

Name *