China's True Minsky Risk May Be Political
The order and stability on display at the Communist Party congress could prove just a veneer if Xi Jinping ignores the need for a course correction.
A portrait of Chinese President Xi Jinping — striking a Maoist pose — at the Museum of the Chinese Communist Party.
Source: Bloomberg/BloombergThe late economist Hyman Minsky is famous for developing the theory that long periods of steady investment gains can foster complacency and thus encourage excessive risk-taking, leading eventually to a crisis: what was later termed the “Minsky Moment.” In other words, stability breeds instability. Minsky's work has gained influence, particularly since the global financial crisis. Perhaps it also deserves some attention in the political realm, particularly where China is concerned.
A comparison is instructive. It’s party conference season on opposite sides of the world. In the UK, the ruling Conservatives staged a display of the ruthless, messy nature of democratic politics, forcing their newly enshrined leader, Liz Truss, into a policy U-turn that casts doubt on her survival as prime minister only weeks after she took office. Over in Beijing, a very different conclave is about to take place, one that is far more scripted, sedate and secretive: the 20th congress of China’s Communist Party.