Kornai’s concept “soft budget constraint syndrome” revisited from the war finance angle

Adam Kerenyi

Keywords: soft budget constraint syndrome, values, war finance

Abstract: János Kornai coined the term of concept of soft budget constraint syndrome (SBCS) 50 years ago during the era of cold war. He borrowed the expression “budget constraint” from the terminology of microeconomics, the expression “syndrome” from medicine. According to the theory the budget constraints could be "harder" with the capitalist or "softer" with the socialist system. There is a need to distinguish SBC-event (single bailouts of single troubles) and SBC-Syndrome. Kornai when revisited his system paradigm, he also compared the hardness and softness of autocracy and dictatorship. I claim that Russia was a dictatorship prior the invasion on Ukraine. My arguments will focus on the war finance from the SBCS angle. I will also analyze the expectations of the sanctions. I will coin the term Too “army to fail”, when not the financial sector but the defense industry could count on rescues. My main contribution would be to emphasize the importance of the values. The ultimate danger is that due to the SBCS in the war finance the reckless spending becomes the new normal, which might replace monetary and fiscal responsibility.