Political Economy of Major Institutional Change: Debt Crisis, Power Asymmetries, and Structural Adjustment in Latin America

New institutionalism (NI) has emphasized the importance of studying institutions in economics and politics while avoiding approaches grounded in critical political economy. This omission reflects a perspective that treats institutions as abstract “rules of the game,” overlooking their role in reproducing power asymmetries. To explain major institutional transformations, NI developed the concept of critical junctures, framing change as contingent and disconnected from power dynamics. This article demonstrates the limitations of that framework in accounting for the wave of institutional restructuring that followed the debt crisis in Latin America. Nearly 20 countries underwent convergent processes of accelerated liberalization under asymmetric power relations involving debtor states, creditor governments, and international financial institutions. The article argues that only a perspective grounded in critical political economy can explain these convergent outcomes and introduces the concept of focal junctures to analyze how structurally embedded power configurations produce patterned, non-contingent institutional transformations.