Identity struggles are once again a salient problem in world politics. This article aims to throw light on the sources, dynamics, and consequences of identity formation and mobilization. It makes two theoretical arguments. First, because collective memory is both a seemingly factual narrative and a normative assessment of the past, it shapes a group's intersubjective conceptions of strategic feasibility and political legitimacy. This is why collective identity is above all an expression of normative realism: a group's declaration to itself and to others about what it can or cannot do; what it will or will not do. Second, at critical junctures competing actors assert or contest the normative realism underlying collective identity. They do this through rhetorical politics, deploying their powers of persuasion in order to engage the constitutive elements of the group's shared identity. In practical terms, rhetorical politics is structured by a dominant frame: a historically shaped discursive formation that does two things. It articulates in readily accessible ways the fundamental notions a group holds about itself in the world and allows or disallows specific strategies of persuasion on the basis of their presumptive realism and normative sway. Within this frame, rhetorical politics engenders a collective field of imaginable possibilities: a restricted array of plausible scenarios about how the world can or cannot be changed and how the future ought to look. Though circumscribed, this field is vulnerable to endogenous shifts, precisely because actors' rhetorical struggles introduce conflicts over the descriptive and prescriptive limits of what is "realistically" possible. Such conflicts may in fact produce a new dominant rhetorical frame and profoundly influence a nation's political and economic development. Two contrasting cases from Latin America offer empirical support for these arguments. The article shows that the sharp developmental divergence between Costa Rica and Nicaragua can be properly understood only through close analytical scrutiny of the different rhetorical frames, fields of imaginable possibilities, and collective identities that rose to prominence at critical points in these countries' colonial and postcolonial histories.