The Capital Ownership Account (COA), is the key mechanism under the Economic Democracy Act for growing the economy in a sustainable, environmentally sound, and universally inclusive way. Previously referred to as the Individual Stock Ownership Plan (ISOP), the COA is like a special kind of Individual Retirement Account (IRA) to be set up by each citizen (adult and child) at any bank or approved financial institution. The main differences between a COA and an IRA, however, are that:
- the COA is not just a retirement vehicle, but a powerful tool for financing new stock issuances by any enterprise that has a feasible (i.e., self-liquidating) capital growth project; and
- the COA is an ownership-building mechanism that enables each citizen to acquire productive capital assets in the form of corporate growth shares that pay for themselves and thereafter generate a stream of consumption income out of future profits (dividends) throughout their lifetime.
Through their personal COAs all “eligible” citizens and families would be able to acquire diversified holdings of newly-issued, full dividend payout corporate shares on credit repayable with future tax-deductible dividends. “No-interest” credit (with a one-time service fee to cover all bank charges and a capital loan insurance premium) and new asset-backed money created by the commercial banks and central bank for private sector growth, would be “irrigated” through citizen COAs to invest in the newly issued shares of companies seeking to grow. Citizens could invest their Capital Ownership credit in, for example, 1) a company for which a member of the family works, 2) a company in which the family has a regular billing account, or 3) in new share issuances of profitable corporations with successful track records.
Where would the money come from to finance COA loans?
The central bank would estimate the growth assets needed each year in both the public and private sectors for new plant and equipment, physical infrastructure and rentable space. To the extent a well-managed private sector company is willing to add and manage some of those assets under a soundly conceived feasibility plan, the central bank can arrange through its discount mechanism to expand commercial bank credit and asset-backed money at a low servicing fee. Commercial banks would also be able to set their own mark-up on the cost of newly created credit to a COA. In place of conventional, past-savings-based collateral, capital credit insurance would be issued to cover the risk that a COA loan is not paid off.
The COA offers a voluntary alternative to stem some of the projected increased costs of the Social Security and other public sector retirement and social welfare schemes, and supplement or replace them with an asset-based stake in the productive sector of the economy.
With such credit available to the nation’s COA market, active and retired public sector workers, for example, could acquire a growing diversified portfolio of full dividend payout shares in new and expanding enterprises holding such shares. This would provide significant retirement benefits for public sector employees and those citizens who do not work for a corporation or who are unable to work. This new source for funding retirement benefits would also help radically reduce social support costs and future pension obligations of the government, generally one of the most costly items in a government’s budget. And it could also be used to meet unfunded pension obligations.
For more information on “where the money will come from,” see “Graphic Overview: Financing Green Growth with Capital Ownership Opportunities for Every Citizen.”