In the two decades between 1973 and 1994, all European countries removed long-standing capital controls---national laws governing the flow of money and investment across borders. This raises two interrelated puzzles: why did European countries abandon controls? And why did some countries precede others in doing so? This dissertation goes against the widely held view that changes in the international environment made capital flows unmanageable and capital controls pointless. Instead it argues that government choice played a key role in capital decontrol, at least initially. Changes in the macroeconomic ideas held by decision-makers---the macroeconomic policy stance---produced a new control policy When governments shifted from a belief in the utility of government intervention (interventionism) to a belief in the efficiency of the market (liberalism), capital controls went from being a necessary bulwark to an inefficient hindrance---a transformation that resulted in their elimination.; This study traces the historical link between macroeconomic ideas and capital control policy in three cases (Germany, Great Britain, and France), each representing a distinct mode of transition to liberalism. In Germany, a determined group of liberal policy-makers crafted a macroeconomic strategy based on low inflation and respect for private investment, which produced a successful postwar recovery. Despite a brief interlude of interventionism in the 1960s, the deeply engrained commitment among some policy-makers to liberal policies overcame mixed support from the financial sector and made monetarism an attractive option during the economic crisis of 1973. Germany removed most of its controls years before other countries. In Great Britain, Keynesianism had no answers for the stagflation of the 1970s, which spawned strong domestic calls for liberalism from actors within financial markets. Because of its strong capital markets, Great Britain decontrolled early. For other countries with less powerful capital markets---represented by France---internal pressures for liberalism paled in relative importance to external pressures. These countries converted to liberalism only after renewed efforts at interventionism failed and pressure from the EC, Germany and private capital markets made controls unsustainable.
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