My life in the world of books began with lunch, a menu gastronomique of mortification. At 25 I had just been taken on as an editor at Faber & Faber, and the chairman wanted to check out the new recruit. In the publishing world of the 1970s, Charles Monteith was as grand as they come, a vintage Bentley to my Ford Fiesta. Not only was he Philip Larkin's editor and a Fellow of All Souls, he was also credited with discovering Lord of the Flies. All in all, a giant. Naturally he was a member of the Garrick Club. It was there, shortly after my appointment, that I was subjected to that old Establishment ordeal: trial by knife and fork.

The Garrick was the crossroads of literary London, where publishers traded gossip with actors, journalists and lawyers. The princes of the metropolitan media, young and old, mingled on equal terms at a refectory board in the middle of the cavernous dining room in an atmosphere reminiscent of public school. Charles was taking no chances. We would eat in a kind of social Siberia to one side. So, after some terrifying introductions ('Sir Edward, meet my new colleague...'), we reached the sanctuary of our separate table.

While Charles rumbled on with his stories of working with 'Tom' (Eliot), 'Wystan' (Auden) 'Bill' (Golding) and 'Philip' (Larkin) I took refuge in the Garrick's menu, a document the size of a small peace treaty. In a moment of mad adventurism I decided to choose quail, chiefly because I was curious to taste this exotic bird. After the crisis of arriving at the club, and surviving the introductions, I was beginning to feel calmer and more confident. Wasn't that Sir John Gielgud? Could that be Kingsley Amis with some whiskery bloke who might be John Osborne?

The quail arrived, drowned in gravy - an exhibit from a particularly nasty air crash. Charles, I think, was eating fish. He was a big bald man with something of Sir Roderick Glossop about him, an air of watchful geniality that could be both avuncular and intimidating. Charles was in full flow as I tackled the quail. To this day I don't know how I did it, but the next thing I knew the bird's tiny carcass had shot off my plate and landed on the carpet not far from the exquisitely shod feet of Sir John G.

If there are books of etiquette which address what to do with a flying quail rôti, I have not found them. There was a ghastly moment while I debated my options. Should I:

1. Crack a joke and try to pass the thing off?

2. Signal to a waiter for help?

3. Run away?

4. Resign on the spot?

5. Pretend nothing had happened?

Apparently, the correct answer was 5, but Charles was in mid-anecdote about Tom or Bill, oblivious to my quail drama. Eventually, after a hiatus of about 10 years in which revolutions broke out and were ruthlessly suppressed, dynasties fell, and the fate of the earth hung in the balance, I rose to my feet, hopped across the floor to the quail, picked it up, put it back on my plate and resumed eating.

Nothing was said. The rest of the lunch passed in a blur. Soon I was back in Faber's Queen Square office contemplating a desk as empty as my lunchtime plate and wondering if I would be fired before or after I had managed to find even one writer worth publishing.

It is only 25 years ago, but go back to the British book trade of 1979 and you find London dotted with dozens of small, independent imprints run by strong-minded mavericks. Book shops are gloomy, inhospitable places, smelling of stewed meat. In Hampstead, the manager of WH Smith turns off the lights when there are no customers to save electricity. In 1979 there is no Borders or Waterstone's, no Random House, no Orange Prize - and no Hay Festival.

Most telling of all, there is virtually no money, especially for writers. Novels are commonly signed up for £500, short-story collections for £200 or £300, or even less. When the hot-shot young agent Ed Victor sold a now-forgotten yarn, The Four Hundred by Stephen Sheppard, for a quake-worthy 'six-figure advance', the shockwaves reverberated from Bloomsbury to Harmondsworth. My starting salary at Faber was £3,500. After the Garrick fiasco it seemed improbable that I would long trouble the company payroll for even a fraction of that exiguous sum.

Probably, it was Margaret Thatcher who saved my bacon. The Thatcher boom changed everything. Ironically, it was the most right-wing Conservative government in memory that liberated a torrent of creativity. I found myself, by accident, in the right place at the right time. Another irony: it was a philistine decade that saw the restoration of the book. The figures tell the story. In 1980 there were 48,158 new titles published in the UK. By 2000 this had risen to a staggering 100,000. Today the figure stands at a record-breaking 119,000: in the world of books, we are all Thatcher's children.

Hand in hand with an explosion of consumer demand came a new generation. The early 1980s saw the emergence of a remarkable group of new writers, most of whom had grown up far from Barchester or Wessex: Julian Barnes, William Boyd, Peter Carey, Maggie Gee, Kazuo Ishiguro, Hanif Kureishi, Timothy Mo, Salman Rushdie and Nigel Williams, to mention some of the most talented. From the 1970s the twin Wunderkinder Martin Amis and Ian McEwan were already established. As editor-in-chief at Faber, and friends with many of these, I found myself with a ringside seat at a mini cultural revolution.

Symbolic of the way in which the global English language was now finding new forms of self-expression, from Sydney to Seattle (home of an obscure hi-tech company called Microsoft), was the transformation of the Booker Prize. In the 1970s this had been a humdrum dinner at which a cabal of dowdy Oxbridge literati rewarded one of their peers for an interesting new addition to the English novel. The only time anyone paid any attention to the Booker was in 1972, the year John Berger, the author of the novel G, donated his prize-money to the Black Panthers. Yeesss! Terence Kilmartin, the great literary editor of The Observer, was so disgusted at Berger's behaviour that he walked out in protest. Otherwise, the prize dinner was just another date in the calendar, an autumnal moment of mellow fruitfulness.

Suddenly the Booker, moth-eaten dinner jackets and all, was on television. The literary press was forced to take notice. Was William Golding's Rites of Passage better than Anthony Burgess's Earthly Powers? Who would win? Off-track betting made the Booker as much a part of the sporting scene as the Derby, avidly reported on throughout the English-speaking world.

One high-point in the global reach of English-language culture came in 1984. The Booker shortlist comprised my author Peter Carey (Illywhacker), JL Carr (The Battle of Pollocks Crossing), Doris Lessing (The Good Terrorist), Jan Morris (Last Letters from Hav), Iris Murdoch (The Good Apprentice) and, a writer Faber had actually turned down, Keri Hulme (The Bone People).

As I remember it, Murdoch and Lessing were favourites for no better reason than that people had heard of them; Carey was a long-shot, and Keri Hulme, a pipe-smoking lesbian from New Zealand, was the rankest of outsiders.

Booker night came around. Peter Carey, his wife, Alison, and I crammed ourselves into rented dress clothes and rolled up at the Guildhall in the carefree spirit of people with nothing to lose. Carey had never been on this shortlist before, though he had won many prizes in Australia. As his editor I was as new to the game as he.

Hermione Lee was presenting the occasion for the television cameras. Eventually the moment came for the chair of the judges, Norman St John Stevas, to announce, to a buzz of astonishment, that The Bone People had won.

There was just one problem, which would not be allowed today. The winner was 12,000 miles away in a South Island fishing village. We in the Guildhall were soon reminded how far away that was. During the feverish lull that followed the declaration of the result, a group of New Zealand women, friends and supporters of Hulme, dressed in traditional Maori costume, advanced through the diners to the bewilderment of St John Stevas, Lee and the rest, and proceeded to enact a tribal dance of celebration. Then it was time for Hermione, as MC, to congratulate the winner, by satellite phone.

Lee: Hello... Hello... Keri... Hulme? [crackle of transcontinental telephone hook-up]

Hulme: (faint, disembodied): Yiss. [more international static]

Lee: I - am - speaking - to - you - from - the - Guildhall - in - London.

Hulme: [crackle, crackle] Aw - yiss - g'day Hermione!

Lee: And - I - am - delighted - to - tell - you that you [dramatic pause] HAVE WON THE BOOKER PRIZE FOR FICTION. [crackle, crackle, hiss, crackle, hiss]

Hulme: Aw! bloody hill!

New Zealand literature's finest hour was a watershed. Salman Rushdie had won the Booker in 1981, JM Coetzee, from South Africa, in 1983. After Hulme's triumph the headline on the story of English language fiction in the 1980s was: The Empire Strikes Back.

Between 1987 (Penelope Lively's Moon Tiger) and 1995 (Pat Barker's The Ghost Road) the only novel that did not hail from the former colonial periphery was Possession. The other winners of those years - Peter Carey, Kazuo Ishiguro, Ben Okri, Michael Ondaatje, Roddy Doyle and James Kelman - were all, in some sense, outsiders.

Away from the glitz of the Guildhall, a similar story was repeated throughout the age of greed. The most interesting newcomers were from outside the academy - Caryl Phillips from the Caribbean (via Leeds); Vikram Seth (from Delhi via California); Hanif Kureishi from Pakistan (via Bromley). These were the leaders of a creative sortie, a boom in English fiction, that established an imaginative bridgehead across which the next generation, writers like Zadie Smith, Hari Kunzru and Monica Ali, could land vital reinforcements.

The international literature of the 1980s was often called 'magical realism'. In retrospect, this was an apt description of the book world in general. Cultural frontiers were pushed back in a goldrush atmosphere. Advances soared. In 1985 I had acquired Vikram Seth's novel-in-verse The Golden Gate for a few thousand pounds. By the end of the decade Vikram was asking, and getting, a one hundredfold increase for A Suitable Boy. Happily for Faber, not every writer came with such a price tag. The first time I met Paul Auster in Manhattan to discuss the manuscript I wanted to call The New York Trilogy we ate chocolate cake in a coffee shop on Madison Avenue and strategised a publication programme for no fewer than five volumes of unpublished work.

The Christmas launch of The New York Trilogy was a high-point of the mid-Eighties literary boom. I have never seen a book take off as Auster's did. Reprint followed reprint. Remembering it now brings back so many other memories of those years in Queen Square: Ted Hughes consulting an astrologer over the appropriate publication date for his latest collection; a coke-fuelled jacket artist trying to strangle Melvyn Bragg; Pete Townshend holding forth at editorial meetings; Harold Pinter coolly pointing out that, on the whole, editors didn't tinker with the texts of his plays; the elfin but steely figure of Jeanette Winterson auditioning Faber as a possible future publisher for her novel The Passion; ex-con John Healy, author of The Grass Arena, threatening to kill Faber chairman Matthew Evans and me with an axe...

Strong feelings electrified every aspect of the author-editor relationship. I spent an extraordinary amount of time in the company of Faber's authors. I remember discussing Ishiguro's choice of The Remains of the Day as the title for his third novel on a beach outside Adelaide.

It was a restless time. Editors who, as I did, had authors all over the place, found themselves travelling throughout the English-speaking world - Sydney, Delhi, Auckland, Singapore, Calcutta and New York. In the mid 1980s I spent an incredible amount of time getting on and off 747s, occasionally bumping into high-flyers from Penguin and Pan books like Peter Mayer and Sonny Mehta. Am I imagining it, or do I remember Mayer reading the typescript of a book called The Satanic Verses in the business class cabin of a jumbo jet returning from Australia in the spring of 1988?

In retrospect, the fatwa was of its time. The Ayatollah Khomeini's medieval rage against The Satanic Verses focused popular and media attention on a novel in a way that was unprecedented. Fiction had been making headlines, and novelists had been news items throughout the Eighties, but this was a matter of life and death. A frisson ran through literary London. It was a long time since books had seemed so dangerous.

Across the Channel it was a different story. As the publisher of Vaclav Havel and Milan Kundera, I was familiar with the price of free expression under the Soviets. Here, too, the pace of change was unnerving and unexpected. I remember visiting Kundera, an exile in Paris, during the summer of 1989. Thousands of Hungarians were fleeing to the West and the conversation naturally turned to the European crisis. What about the Wall? I asked. 'No.' Milan shook his head pessimistically. 'There will be no change there in my lifetime.'

After the Wall came down, European literature experienced a hiatus. German writers adjusted, painfully, to unification. Polish, Czech and Hungarian writers whose work had enjoyed a mystique in the shadows of the Iron Curtain were now obliged to shuffle into the new European daylight and sell their work on equal terms with their less glamorous but equally gifted Italian, French and Spanish counterparts. In the early 1990s, as readers began to look towards the millennium, magical realism was still the stuff of headlines. Novelists were still superstars. If there was one writer who embodied the stellar power of international fiction, it was the glamorous figure of Mario Vargas Llosa.

The vogue for Latin-American fiction - 'el Boom' - was at its peak. At Faber I had published several of Vargas Llosa's novels, including his comic tour-de-force Aunt Julia and the Scriptwriter, and also his masterpiece The War of the End of the World. We had become friends. In the summer of 1990 Mario announced he was going to run for the presidency of his native Peru. It seemed both thrilling and utterly natural. A novelist for Presidente? But of course. As soon as possible I contrived to get on a plane for Lima to enjoy a grandstand view of what some commentators were predicting would be a one-horse race.

As a boy, Vargas Llosa had wanted to be a toreador. There was a side of his nature that seemed to be looking for a real-life drama. Now the movement known as El Gran Cambio ('the great change') promised to sweep my author into the presidential palace on a wave of bourgeois populism.

For a few heady weeks, it looked as though Vargas Llosa might pull it off. When I arrived in Lima in March 1991, he was 20 per cent ahead of his nearest rival in the polls. Those around him, bumping through the air pockets of the Andes on the campaign plane, were mentally booking their seats at his triumphant inauguration.

It was not to be - but the election was great theatre. There were spot-lit rallies, scary helicopter flights and a pervasive air of political thuggery. Mario, who was brave to run, certainly looked like a winner. His campaign seemed to generate huge enthusiasm. His rivals were trailing badly. No one noticed the candidacy of 'el Chinito', the former academic Alberto Fujimori. Even now, the narrative twist of that election looks wildly improbable: Novelist's Presidential Bid Overturned by Unknown Japanese-Peruvian Agronomist. But that's what happened.

Overnight, Vargas Llosa found his support draining away. On polling day I paced the corridors of the Lima Sheraton with his political advisers as the results were posted, and watched a procession of Latin-American generals in operatic bottle-green uniforms make their way to Mario's suite. If there was going to be a coup, maybe I should stay on and witness that, too. But, as it turned out, the big news was elsewhere. On the hotel's television screen were pictures of street fighting in London. For once the revolution was happening in Britain.

Recession followed the poll tax riots. The irrational exuberance of the Eighties gave way to a more sober introspection. Despite the upheavals of the Thatcher years - the Falklands, the miners' strike, and the end of the Cold War - some things hadn't changed. Charles Monteith had retired long ago, handing the management of Faber to Matthew (now Lord) Evans, with whom I enjoyed the happiest professional association, but the ex-chairman had not lost his old habits. Not long after my return from Peru I had a phone call, proposing lunch. He did not suggest meeting at the Garrick.

When Charlie Chaplin and his friends set up United Artists it was said that the lunatics had been put in charge of the asylum. The process I have described certainly evokes that description. Just as the books we read in childhood are the ones that will always speak to us with the force of revelation, so the manuscripts I grew up with in the 1980s seem fresh, vital and important in a way that is irrecoverable. After those heady years the next decade passed in a blur, punctuated by moments of excitement, like my first reading of Zadie Smith's White Teeth or the typescript of Monica Ali's Brick Lane.

During the 1990s, in keeping with the new mood, the English fiction boom was transformed into something more down-to-earth. After the high, fantastic fabulations of magical realism, the reading public wanted stories they could trust and relate to. For a decade and more, the novel, now an international genre, had explored the outer limits of narrative and had reached a point where storytelling, the novel's first purpose, was in danger of being forgotten. Narrative was in vogue again. A little book called Longitude became the surprise hit of 1996. Faber's day, such as it had been, was over, for the moment. Now hopelessly out of touch with the best new writing, I failed, for example, to recognise Nick Hornby's extraordinary talent when it was handed to me on a plate garnished with watercress.

By then publishing was in the process of a transformation. Output, turnover and advances all went up. Companies merged or went out of business. Fiction was for kids: Harry Potter's quidditch supplanted magical realism's angels. Bloomsbury and Fourth Estate were the new-model publishers. The homespun and eccentric editorial figures from the 1970s went into retirement. As I look back now, I'm inclined to say it was a golden age - but I would, wouldn't I? When, in 1995, I collapsed with a stroke, it was momentarily tempting to interpret my illness as a metaphor.

Once I recovered I found I was no longer Faber editor-in-chief but literary editor of this newspaper, a gamekeeper-turned-poacher. One day, shortly after I joined The Observer, I ran into a former author. He could not disguise his incomprehension at my new job. 'Do you go in every day?' he asked. To his amazement, I explained that this seemed like a good idea and added, for good measure, a description of Sunday journalism, the daily mountains of new books, the essential work of the sub-editors, and the twice-weekly conferences.

'Conferences?' queried my friend. 'Whatever for?' I explained that these were midday get-togethers at which the various sections discussed with the editor what would go into the paper on Sunday. 'Christ!' he exclaimed, satirically, 'You don't mean to say you produce all that newsprint deliberately.' He looked at me, disbelieving. 'Every morning, you say?' I conceded that this was part of the contract. 'So whatever do you do in the afternoons?'