The recession, which began in the early summer of 1990, shows little sign, nearly two years later, of coming to an end. The precipitous fall of mid‐1990 to mid‐1991 may be over but output is no more than ‘bumping along the bottom'and economic recovery in any meaningful sense remains elusive. For the Conservatives, in the run‐up to the General Election, this was more than inconvenient; for the Treasury which had confidently forecast a resumption of growth in the second half of last year, it raises the question of why the recovery is still not proceeding according to script; for the economist it poses the more general question of why recessions come to an end, and what are the pre‐conditions for economic recovery to t