Institutions for Poverty Alleviation in China Emerson Niou Duke University 1. Ever-Normal Granary System/ Commodity Loan Program 2. Charity Granary System 3. Communal Granary System 4. Mutual Financing Association 5. Friendly Society Mencius (372-289 B.C.) on the need for grain storage (cid:127) “When the grain is so abundant that even dogs and swine eat the food of man, you [the government] do not make any collection for storage. When there are people dying from famine on the roads, you do not issue the stores of your granaries for them, but blamed the famine on bad weather.” Ever-Normal Granary System (cid:127) In good years grain will be over supplied, price will drop, and farmers might not make enough profit to sustain their farms. (cid:127) In bad years grain will be under supplied, price will increase, and consumers need to pay high price for food -- inflation. (cid:127) In good years, farmers are hurt; in bad years, consumers are hurt. So it is beneficial for the society if the price of grain can be kept stable. How to keep the price of grain stable? (cid:127) Buy at higher than the market price, and sell at lower than the market price. When the price of grain was low, the government should buy it at the normal price, higher than the market price, in order to profit the farmers. When the price is high, the government should sell it at the normal price, lower than the market price, in order to profit the consumers. (cid:127) Merchants, on the contrary, buy low and sell high. Merchants will even artificially limit the supply of grain so to raise the price. The Ever-Normal Granary System (cid:127) First established in China in 54 B.C., during Han dynasty. (cid:127) Two important functions of the Ever-Normal Granary System: 1. Price control 2. Famine relief