Good ideas that didn't pan out, part 1: free money
There's something melancholy and romantic about the great schemes and projects of the past. The romance lies in their ambition; the melancholy in the fact that so often, they don't come to pass.
Once in a while you come across a project that made it off the drawing board and had some success in the world, but later on sank into oblivion. Even more rarely, you find a forgotten project that seems to have something to offer to the world today.
Part 1: A new economy in the Tyrol
In 1932 the Austria town of Wörgl was a typical casualty of the Great Depression. Its coffers were empty and one in three of its citizens were unemployed. But its response was anything but typical.
A new mayor was elected who subscribed to an unorthodox economic theory called Freiwirtschaft. The theory suggested a mix of policies, some of which are still controversial (such as making all land public property) while others are now mainstream (like free trade). But its most potent policy at the time was its advocacy of 'free money', that is to say money issued for a fixed period of time only.
The new mayor, Michael Unterguggenberger, persuaded the local bank to issue a local currency, which he used to pay municipal employees. Wörgl Schillings became worthless if they didn’t receive an official stamp each month, which cost 1 per cent of the note's value – in effect, a minus 12 per cent interest rate.
The impact was dramatic. The people of Wörgl were keen to spend the new notes, since they lost their value quickly. They bought things, they built things (including a new bridge), and the unemployed found work.
A year later, the Austrian Central Bank cracked down on unofficial currencies and Wörgl Schillings were no more. But in a time of sluggish economic growth, with community currencies growing in status, could it be time for a revival?
More in this series
Part 3: the Peckham Experiment
Part 4: Sword into ploughshares at Lucas