SOAS Research Online

Abstract

With the exception of Costa Rica, despotic regimes ruled the Central American countries in the postwar period, in which the use of force played a key role both in the maintenance of civil order and in the day-to-day functioning of the economy. In these societies the allocation of resources and the division of labour derived as much from the police power of the states as from market forces, for these were economic systems based upon coerced labour.1 In neoclassical analysis, under restrictive assumptions rarely made explicit in the conservative 1980s, markets give generally efficient outcomes as the result of the impersonal interaction of buyers and sellers. Among these assumptions are: access to market information, formal equality of economic agents, freedom of entry and exit from market contracts, and so on. Whatever the relevance of this analytical framework elsewhere, it was singularly inapplicable to Central America.