The development of Central America in recent decades presents a paradox. As measured by the growth of real Gross Domestic Product (GDP) per head, the region's performance compares favourably with the rest of Latin America and other less developed countries (LDCs). At the same time, political convulsions have become more acute, and in no part of the isthmus – not even in Costa Rica – is political stability assured.

This essay seeks to clarify the particular blend of sociohistorical elements that created a distinct form of authoritarian domination in El Salvador, Guatemala and, to a lesser extent, Nicaragua. Situations of ‘enclave’ versus ‘national control’, the consequences of export agriculture, the impact of the commodity cycle, and relations between the oligarchy and other social actors are examined in a comparative perspective to distil commonalities and differences. The emergence of a distinct variety of the capitalist state of exception followed the crisis of oligarchy brought about by the Depression of the late 1920s and early 1930s. State power became public at the time and the traditional oligarchies no longer ruled directly, although they were able to weave a relatively complex alliance. This is identified as a ‘reactionary coalition’ capable of resisting any change in the model of export agriculture, ‘unreformed’ capitalism, and political authoritarianism. This model is identified as ‘reactionary despotism’, and the contemporary crises of El Salvador, and Nicaragua are related to the deterioration of this form of political domination

Why have the Washington authorities under both Democrat and Republican administrations chosen to devote so much time, money, and political capital to the pursuit of a policy in Central America that most international opinion, and a substantial proportion of domestic US opinion, considers to be unwarranted interference? The standard answers to this question fall into two main groups, each with strong ideological connotations. The official American position, most forcefully expressed in speeches by such prominent figures as ex-Secretary of State Alexander Haig, UN ambassador Jeane Kirkpatrick and President Ronald Reagan himself, judge events in Central America as yet another example of worldwide Soviet expansionism, in this case channelled through Cuba. On this view, it is not possible for America to stand back from the struggles of this small and apparently unimportant region, for unless the Russian cause is decisively rebuffed there is a real risk of ‘falling dominoes’, to the Panama Canal and beyond in one direction, and even northward into Mexico.

Prosperity and increasing inequality may well be the most suitable terms to describe at first glance the evolution of the Central American economies from the post-war period until the beginning of the eighties. Prosperity based on a very favourable external economic situation was characteristic of the fifties, with promotion of technological modernization and some diversification in the export sector. Sustained economic growth continued during the following decade, thanks to structural change brought about by industrialization and by the process of Central American integration. This upward trend began to break up in the seventies, and the whole region was plunged into crisis and instability. Although the gloomy side of the new international situation cannot be denied, twenty or thirty years of prosperity seem to have created internal conditions sufficient to nurture a social conflict of vast proportions, which embraces since at least 1978 not only the economic sector but all aspects of Central American life.

The subject of agrarian reform in El Salvador has an importance which extends beyond considerations of that country's immediate crisis. The agrarian problems in many parts of Latin America originate from similar sets of conditions, but nowhere have these conditions reached a more critical point than in El Salvador. Consequently the experience of agrarian reform there is likely to anticipate those problems of agrarian change which eventually will have to be faced by most Latin American countries.

Recent research on Costa Rican social and economic history has made notable advances regarding the classic coffee economy of the 1850–1950 period. Major works by Hall and Stone, and essays by Cardoso, Pérez, Vega, and Samper have offered suggestive new materials and perspectives on the basic dynamics of coffee culture and the social antagonisms which developed within it. Nevertheless, the differences in opinion in this literature on the coffee economy, in particular the degree of land concentration and proletarianization within the Central Valley region, tend to obscure an even more basic agreement of the pre-coffee starting point: the predominance of dispersed, self-sufficient smallholders on privately owned plots, with a very weak elite structure and minimal social division of labor in artisanry or agriculture.

For the vast majority of people around the world, Central America is a small group of countries bridging the gap between the Mayan ruins of Guatemala and the Panama Canal. The names of those countries are only recognized when the major contending ideologies of capitalism and communism clash in one of them, or when an international figure of ill or good repute establishes some sort of link with them. A football game that leads to war also catches the eye of the media. An example of the first situation would be the ousting of the communist regime of Jacobo Arbenz in Guatemala by Honduran troops backed by the United Fruit Company and the CIA in 1954; another would be the rise of the marxist regime in Nicaragua in 1979. The second is evident in the establishment in Costa Rica of the international fugitive Robert Vesco around 1970, as well as in the visit of Pope John Paul II to each of the five nations in 1983. The last refers to the ‘soccer war’ between El Salvador and Honduras in 1967. In each instance the countries concerned made headlines around the world for a short time and people learned their approximate geographical location even if in a passing fashion.