When Margaret Thatcher took power in Britain in 1979, one of her first decisions as prime minister was to scrap capital controls. It was the beginning of a new era and not just for Britain. Free capital movement has since become one of the axioms of modern global capitalism. It is also one of the “four freedoms” of Europe’s single market (along with unencumbered movement of people, goods and services).

We might now ask whether the removal of the policy instrument of capital controls may have contributed to a succession of financial crises. To answer that, it is instructive to revisit a debate of three decades ago, when many in Europe invested their hopes in a combination of free trade, free capital mobility, a fixed exchange rate and an independent monetary policy — four policies that the late Italian economist, Tommaso Padoa-Schioppa, called an “inconsistent quartet”.

What he meant was that the combination is logically impossible. If Britain, say, fixed its exchange rate to the Deutschmark, and if capital and goods could move freely across borders, the Bank of England would have to follow the policies of the Bundesbank.