Lynton Crosby has trapped Miliband on a sticky wicket over union policy

Lynton Crosby: one of the great Aussie spinners. Photograph: Stuart Clarke/Rex Features

The beginnings of the long-awaited British economic recovery, insofar as they are soundly based, are of course to be welcomed. But insofar as the recovery depends on old-fashioned inflation of house prices, one should beware.

The idea, however, that the good figures for gross domestic product in the second quarter constitute a justification of the coalition's leeching approach to the economy is laughable, indeed contemptible.

Moreover, it is not strictly accurate that we are now witnessing the beginnings of recovery from the financial crisis of 2007-09. For the economy was recovering under the much-derided policies of Gordon Brown and Alistair Darling in 2009-10 until it was hit on the head by the coalition's decision, egged on by a misjudgment by the Bank of England, to unveil an entirely unnecessary policy of austerity.

We have now had three years of George Osborne's cynical attempt to manipulate the electoral and economic cycle. What this nation and leading industrial economy has been subjected to is not so much a deficit reduction strategy as a growth reduction strategy, accompanied, ironically, by precious little progress in deficit reduction.

By contrast, although the recovery in the US has been constrained in recent months by the impact of the Republican-induced "sequestration" cuts in public spending, the growth-orientated policy pursued there has been a laboratory experiment in the relationship between growth and deficit reduction.

It can hardly be emphasised enough how right the shadow chancellor Ed Balls was in his Bloomberg speech of August 2010 to oppose the Osborne plan. His predictions of the consequences were all too accurate. Also, let it be stressed, those of us who agreed with Balls and have opposed the economics of austerity and lost growth took no pleasure from seeing these predictions fulfilled. It was therefore with a heavy heart that one witnessed Labour's recent U-turn on cuts, with its promise to adhere to the coalition's spending plans for 2015-16 – if Labour returns to power, that is.

Which brings us to the extraordinary turn of events in recent months, during which the Conservatives in general and their strategist Lynton Crosby in particular, seem to have so unnerved the Labour leadership that many are beginning to wonder whether Labour is in danger of seizing defeat from the jaws of electoral victory.

A local episode concerning the trade unions and the Falkirk Labour party appears to have turned into a full-frontal assault by Labour leader Ed Miliband on the trade union movement, at just the time when concerns about low pay and inequality are emerging not only as a social issue but also as one that has macroeconomic relevance. The macroeconomic point is that more and more research indicates that the pace of economic growth is being affected by a squeeze on real wages – quite apart from the Europe-wide outburst of austerity economics.

As the veteran political journalist Ian Aitken observed last week: "There is a link between low pay and the need for unions." And it is refreshing to note that an alliance between Balls and the US economist Lawrence Summers is looking at ways by which the fruits of economic growth can be more fairly shared than in recent decades.

Aitken, a great Tribune columnist these days, worries, only half-jokingly, that, by having Miliband on the run over Labour's historical association with the unions, Crosby is running Labour policy as well as Conservative. Crosby is the most successful spinner the Australians currently have in the country.

One just hopes that Miliband gets himself off the hook whereby he risks Labour divisions over the unions taking over from Conservative divisions over Europe as the key factor in the runup to the next election.

There is still a long way to go. As Lord Adonis, Labour's secret weapon, pointed out last week at the Mile End Group's launch of his book Five Days in May on the 2010 coalition negotiations, at the last minute of those negotiations the future chancellor George Osborne swung opinion in favour of a five-year term.

We are, God help us, only just over halfway through this parliament. Adonis, who is a doer as well as a theorist, is working hard on Labour's growth strategy for the next election. Let us hope he helps to pull the opposition together after this moment of weakness.

Meanwhile, behind all the fuss about one quarter's revival, let us note that output remains some 15% below what historical trends would have pointed to. The coalition has undoubtedly won the prize for the most successful growth reduction strategy in living memory.

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