From a crisis to a drama: How Justin Cartwright turned the banking panic into fiction

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When you write urgently topical fiction with its finger on the pulse of earth-shaking events, from time to time the day's headlines will trump your invention. Especially where Cornish pasties are concerned. Much of Justin Cartwright's new novel Other People's Money (Bloomsbury, £18.99) dwells on the financial meltdown, the misdeeds of the bankers and the ironclad resilience of the English upper crust. But one running gag concerns a moribund Cornish newspaper with a campaign to wrest official recognition for the Duchy's trademark delicacy from EU bureaucrats who can't believe the humble pasty deserves to rank with Champagne or Camembert.

I return from our meeting in a Kensington café, where Cartwright has ridden from home in Islington on his motorbike, to find that thrilling news has just broken. On Tuesday, the European Commission finally granted "Protected Geographical Indication" (PGI) status to genuine Cornish pasties. They may from now on bear a special logo to advertise their authenticity. For more than two decades, I have admired Cartwright's fiction for its uncanny habit of catching the zeitgeist in nets of fine-meshed tragi-comic steel. I didn't realise that this precision and prescience extended to the realm of gristle-packed traditional snack foods.

Other People's Money conveys all the gamey flavour of the scandal, panic and bluster that accompanied the banking crisis and its aftermath. Yet Cartwright, always the consummate pro, knows better than to make a stodgy meal of his theme. "You don't want to start with an immense thesis," he says about the novel of contemporary history. "You need to care, and you can only care if you care about the characters." Above all, fiction that tries to take the temperature of febrile times cannot risk sounding like a treatise. "The point about 'state-of-the-nation' novels," argues the writer who has delivered more, and better, examples of the brand than anyone of his generation, "is not that they should be about the 'state-of-the-nation', but they should be about people." For Cartwright, "You've got to have characters who have an independent life," not emblematic cut-outs hauled onstage to prove an author's point.

The (first?) Great Crash of the early 21st century has quickly given rise to its own creative canon. In theatre, it includes plays such as Lucy Prebble's Enron and David Hare's The Power of Yes; on screen, such films as Wall Street: Money Never Sleeps and the documentary Inside Job. In British fiction, early models of the post-crunch novel range from Sebastian Faulks's A Week in December to the ex-banker Alex Preston's This Bleeding City and – less directly - John le Carré's Our Kind of Traitor.

In Other People's Money, Cartwright never blinds us with financial science. Tubal and Co, a venerable private bank founded in 1671 and now a discreetly iconic City institution, wallows deep in the ordure. Sir Harry Trevelyan-Tubal, the patriarchal baronet, is slipping out of this life after a stroke at his exquisite Matisse-filled villa on the Cap d'Antibes. Back in Bread Street, "casino banking" has infected Tubal's and left a fatal weakness in its wake. The hedge funds backed on the crest of the funny-money wave by Julian, Harry's younger son and semi-reluctant successor at the bank, have gone down with all hands and hundreds of millions of clients' funds on board. A couple of canny deals on the very edge of legality will allow Julian and sidekick MD Nigel to pad the bank's assets until the sale to US banking giant First Federal goes through.

Will the ruse come to light, and how? Meanwhile, the elderly threadbare thespian Artair in his rundown Cornish boathouse and Melissa, an inquistive cub reporter on the local rag, will play game-changing parts in the fate of the house of Tubal.

Other People's Money briefs us swiftly on toxic sub-primes and the global fall-out from "utterly useless and finely diced mortgages". Always, though, the people, and their mixed motives, count for more than the minutiae of the balance sheets. "I probably couldn't have got my head around anything more complicated," Cartwright over-modestly claims. Rather, the logic of good fiction simplifies the scams.

"I also gave up on some of my discursiveness," he says. Cartwright fans will find fewer of the richly digressive "sidebars" (often animal-related) with which this disciple of Saul Bellow often adorns his fiction. "I made it much more straightforward, I thought": true enough, give or take a splendid McGuffin that involves the upcoming movie schedule of Daniel Day-Lewis and a couple of magnificent riffs on edible crustaceans. The novel moves fast, strikes hard, and rings true.

He put in the dutiful hours of research, talking to bankers and peering through the heavy drapery of style that surrounds the extremely rich: "Nobody, by the way, wanted their names mentioned in the acknowledgements." As for the financial super-class, Cartwright has little affection for their smugness and myopia. Many "live in a very, very closeted world and don't really get it half the time. There's nothing more absolutely appalling than to go to dinner with people who simply speak in time-worn clichés." Yet his novel refuses to paint the Trevelyan-Tubals in the lurid colours of Victorian villainy. Harry and Julian, shrewd pater and floundering scion, share little with (say) Augustus Melmotte - the grandiose old fraud from Trollope's grandaddy of financial-crash novels, The Way We Live Now (1875).

Slipping into the grey area where sharp practice ends and outright crime begins, Julian fervently needs to rescue an institution that – for him – embodies sterling virtues. The private bankers whom Cartwright met really did believe in their firm's embossed prospectuses. "The assumption they have is that somehow they understand money, and that the country needs them... that they're the thoroughbreds of the whole business and the Canary Wharf people are the barrow boys". So these priests of wealth "behave as if they're privy to some mystery".

Other People's Money lifts the veil of mystique. As in previous books, Cartwright excels at portraying high-class English tradition as a form of showbiz - a Wizard of Oz sham in which feeble hidden figures somehow project the illusion of majesty and mastery. Yet, as ever, he captures the hidebound troupers with an irony and mischief that embraces a fascinated curiosity: "In fairness to English upper-class society, it's been enormously productive and interesting and creative."

As his fiction demonstrates, he knows how hard this caste will play to ensure its survival. Its life-saving tactics, now as always, involve opening the brass-plated door to the zest and nous of newcomers. "It's a commonly held delusion in this country that we have a class system," he argues. "For a brief period, we had a system in which you were supposed to have known your place. But actually British society... has been incredibly permeable. Lloyd George certainly opened up the aristocracy to anybody with money." These days, as media-driven celebrity re-balances the social mechanism away from its old poles of City money and political authority, "We don't know where we stand in any coherent way."

Cartwright has plunged into the money-pits before. In 1990, Look At It This Way – his second serious novel, after some apprentice pot-boilers and Interior in 1988 - resoundingly rang a curtain down on the Thatcher era of fast cash and low deals. Other novels such as In Every Face I Meet (1995) and Half in Love (2001) sustained a note of visonary reportage. Such books infuses a fierce grasp of contemporary history with a sense of lyricism and longing that brings an edge of transcendence to his worldly voice and timely plots. And Cartwright has always been a virtuoso of family drama, as power-relations shift and generations swap places. In Other People's Money, family and finance forever intertwine.

Cartwright comes to his England as an outsider. He was born in South Africa in 1945, son of a courageous editor of the liberal Rand Daily Mail in Johannesburg. That paper carried the anti-apartheid flag when to do so courted real risks. The secret service once delivered a dead dog to AP Cartwright's office as a warning – the regime's equivalent of a Mafia horse's head.

After the University of Witwatersrand, Cartwright arrived in Oxford as a late-1960s Rhodes scholar. For all his acidic commentary on English establishments, then he could see the point of the place. "People talk about it in terms of bitterness and envy, but there are an awful lot of intelligent, urbane, liberal people there. If you came from South Africa, it was like waking up in heaven." Later he worked in films and, famously, directed the 1978 sex comedy Rosie Dixon: Night Nurse: a star-studded satire on the Carry On... genre with John Le Mesurier, Beryl Reid and Arthur Askey in the cast. Aficionados report that it stands up well.

A spell in advertising followed and – crucially – a long association with the Liberal-SDP Alliance as its media adviser over three elections. His intimacy with the darker arts of spin informs book after book. Other People's Money pivots on the question of who controls the story of the tottering Tubals – and who can claim the last word.

High finance, like high politics, turns out to be built on the shifting sands of fiction. With the cult of phoney derivatives, "a huge industry was in thrall to fables". For Cartwright, "My experience comes partly from having been brought up in South Africa, and knowing that ideas have consequences." But, campaigning with the Liberal leader David Steel, he saw "just how makeshift some of the stuff you said was. It was very off-the-cuff sometimes. We'd be proclaiming eternal principles that had been invented over a cup of tea just before the Party Political Broadcast."

Many pillars of society in Cartwright's fiction stick to that recipe. Wrap up scraps, leftovers and dubious chunks of ancient matter into a neat parcel and label it a hallowed tradition. A bit like a Cornish pasty, perhaps? In the event, the put-upon people of the Duchy lend his latest novel its closing note of hope. Junior sleuth (and up-and-coming blogger) Melissa belongs to a future freed from the lies and lures of heritage England - but also from its verities. "The area of consensus in society has shrunk," Cartwright senses. "So you don't any longer have those fixed points we had – even when I first arrived in the Sixties. I remember standing up in the cinema and singing 'God Save the Queen'. It's all gone."

Cartwright has two grown-up sons of roughly her age, but admits that it was still "a challenge" to craft a heroine born in 1989. Neither clear-cut rebel nor meek conformist, Melissa finds her own route into another sort of country. "That's characteristic of our times," says her creator. "It was comfortable for us to put people into fairly straightforward categories, 20 or 30 years ago... It's not as easy any longer."

Does this chronicler of Britain's upheavals and restorations think that the real-life plot, of bankers, bonuses and bail-outs, will finish in a different key this time? "I can't quite put my finger on it," he says, "but there seems to be much more introspection and more effort to somehow normalise things. But I don't know whether it's going to work. Global business is... almost impossible to regulate". Even our fury at the big-money system of the Tubals and their ilk may fade, he thinks. "When push come to shove and the banks are making profits again... Idon't know. I think the question of the nation's ethical compass moving in any particular direction is probably a lost cause now."

Fickle and wavering, we – like many of Cartwright's people – build our hopes around stories with multiple and divergent plots. "The great thing about the public," he laughs, "is that they're quite capable of believing two absolutely contrary views at the same time."