Of legitimate and illegitimate corruption: Bankruptcies in Nicaragua

The concept of corruption is frequently represented as relating to social practices that violate established rules and norms. This paper, however, seeks to demonstrate that corrupt practices are often only possible because they in fact draw on existing institutional mechanisms and cultural dispositions that grant them a certain social approval and legitimacy. The paper aims to explore these issues through a detailed exploration of corruption in Nicaragua, which outlines how competing élite groups have been able to use different discourses to appropriate resources from the state in quite different ways, reflecting the use of contrasting mechanisms for justifying and legitimizing corruption.

The paper focuses on two key periods of recent Nicaraguan political history: that which occurred during the administration of ex‐President Arnoldo Alemán and the events that unfurled in the aftermath of a chain of bank bankruptcies that occurred in Nicaragua during 2001. These events are explored in the context of David Harvey's ideas of “accumulation by dispossession.”

In contrast with more classic practices of corruption in Nicaragua that have openly violated existing formal rules and norms but appealed to an ethos of redistribution and a historically‐specific concept of “the public” in order to imbue their actions with legitimacy, the corrupt practices related to recent banking bankruptcies engaged in an extensive instrumentalization of formal state institutions in order to protect élite parochial interests and to achieve “accumulation by dispossession” through appealing to the legitimating support granted by multilateral financial institutions.

The paper illustrates sharply the inadvisability of perspectives that narrowly define corruption in legalistic terms. Such perspectives focus exclusively on the state as the location of corruption, whereas clearly, in Nicaragua as elsewhere, corruption is a far more complicated phenomenon which crosses the artificial boundaries between private and public sectors. It also evolves and takes a myriad different forms which are intimately connected with the ongoing struggles for control of accumulation processes, suggesting a much more integral role for corruption within accumulation strategies than often allowed for in both orthodox economic and Marxist literatures on capital accumulation.