As Henry Kissinger observes (and I once thought my fingers would fall off before typing those words), the missing element in Central America is any clear sense of what the United States will settle for in Nicaragua. Genuine democracy would be nice, of course. Not just in Nicaragua but also in the Soviet Union, South Africa, Chile, etc. But we don't ordinarily insist on it under threat of war.

The official Reagan administration position is that anything less than a squeaky-clean Minnesota-style civil-libertarian democracy by Nov. 7 on the dot (the regional peace plan deadline) is inadequate and justifies new contra funding. If so, the "peace process" is hopeless.

A hopeless, Potemkin peace process is exactly what the Reagan people thought they had started in August. It was intended as nothing more than a curtain raiser for this fall's debate on contra aid. But along came the Central American leaders, and now there is panic that the peace process might actually produce peace.

The other Central Americans have good reason to feel that a democracy of gemlike perfection should not be the only effective antidote to a U.S.-sponsored guerrilla war. Mexico, for example, is an effective one-party state, maintained through judicious election-stealing, which (as described in the current Economist) "invests one office -- the presidency -- with the temporary trappings of dictatorship," including the choice of a successor. Its economy is crippled by widespread state ownership. The government spews noxious anti-Yanqui Third World-style rhetoric.

On the other hand, Mexico doesn't actually make any mischief outside its own borders. Its press is free within limits, enforced by the occasional shutdown or even murder of a journalist. There's not much torture or arbitrary arrest, as these things go. Only some government officials are involved in the drug trade.

Will this do? The Sandinistas, who are desperate, might accept something like this, especially if accompanied by the hypocritical praise we lavish on Mexico's leaders and its glorious revolution. By what logic do we impose years of war on Nicaragua to demand something better?

Some say the Sandinistas are incorrigible Marxist-Leninists who never will change or abandon their external ambitions. It's all or nothing at all. If true, this condemns not only today's peace efforts but the contra campaign itself at anything like today's level. Kissinger: "The contra aid so far requested could not achieve the administration's stated objectives by military means. . . ."

The grand political illusion of the Reagan era, induced on both foreign and domestic issues, has been that great things can be achieved at no great cost. I call it the Grenada Illusion, after the exception that proves the rule. The cost in this case is not just to America but to the people we're ostensibly trying to help.

The Nicaragua debate has taken place in an antiseptic wonderland where opponents charge that the contras are heartless thugs and administration supporters point to millions being spent on "human rights training." No amount of human rights training is going to prevent civilian casualties in a guerrilla war. More fundamentally, an effective contra war would mean more, not fewer, attacks on cooperative farms, fuel depots, electricity grids. That's the whole idea of guerrilla war: incapacitating the country. This would mean years of deepened misery, poverty, disease and starvation for Nicaraguans and further years of instability for Central America. Maybe contra supporters think the cost is worth paying. But they should be honest about the cost, especially since they won't be paying it.

To Sen. John McCain it's all a game, or perhaps a movie. "Col. Bermudez {the contra commander} sends his very best regards," he smirked to Daniel Ortega on a visit to Managua. "Col. Bermudez and Ronald Reagan should stop killing Nicaraguan children," Ortega replied. What a war! The contras brag about killing an army major. Meanwhile, in Managua there's congressional delegation gridlock and the comandante-in-chief is having them all over for tea.

"The civil war began in Nicaragua when the Sandinistas promised you democracy but failed to meet their commitment," said President Reagan on contra radio. Of course, the civil war actually began years earlier when the Sandinistas were in the hills and "the hated dictator Anastasio Somoza" (Reagan again) was in the warm embrace of the United States. You can't blame the Sandinistas for deep cynicism about America's sudden and selective passion for democracy south of the border.

Yes, yes, you can blame them for plenty else. Maybe the Sandinista revolution would mellow if every modification didn't have to be seen as a concession to Yanqui imperialism. Maybe not. It takes a pretty hardened crew to oust an entrenched, superpower-supported dictatorship in a lengthy guerrilla campaign. That, as it happens, is another reason a less-than-ideal peace settlement is more ideal than continuing -- and, inevitably, expanding -- the contra war.