When Michael Unterguggenberger (1884–1936) was elected mayor of Wörgl, the city had 500 jobless people and another 1,000 in the immediate vicinity. Furthermore, 200 families were absolutely penniless. He had a long list of projects he wanted to accomplish (re-paving the streets, making the water distribution system available for the entire town, planting trees along the streets and other needed repairs). Many people were willing and able to do all of those things, but he had only 40,000 Austrian shillings in the bank, a pittance compared to what needed to be done.
Instead of spending the 40,000 shillings on starting the first of his long list of projects, he decided to put the money on deposit with a local savings bank as a guarantee for issuing Wörgl’s own 40,000 shillings’ worth of stamp scrip. He then used the stamp scrip to pay for his first project. Because a stamp needed to be applied each month (at 1% of face value), everybody who was paid with the stamp scrip made sure he or she was spending it quickly, automatically providing work for others. When people had run out of ideas of what to spend their stamp scrip on, they even decided to pay their taxes early.
It is essential to understand that the majority of this additional employment was not due directly to the mayor’s projects (as would be the case, for example, in Roosevelt’s contract work programmes described below). The bulk of the work was provided by the circulation of the stamp scrip after the first people contracted by the mayor spent it. In fact, every one of the schillings in stamp scrip created between 12 and 14 times more employment than the normal schillings circulating in parallel. The anti-hoarding device proved extremely effective as a spontaneous work-generating device.
Wörgl’s demonstration was so successful that it was replicated, first in the neighboring city of Kirchbichl in January of 1933. In June of that year, Unterguggenberger addressed a meeting with representatives of 170 other towns and villages. Soon afterwards 200 townships in Austria wanted to copy it. It was at that point that the central bank panicked and decided to assert its monopoly rights. The people sued the central bank, but lost the case in November 1933. The case went to the Austrian Supreme Court, but was lost again. After that it became a criminal offence in Austria to issue “emergency currency.”