From the Ruins of Empire, By Pankaj Mishra

This sharp account of the West's decline takes an equally astringent view of Asia's rising powers

By comparison with the conflicts of the two world wars, the battle of Tsushima in May 1905 was not particularly bloody. But the result – the destruction of much of the Russian navy and the humiliating defeat of Russia in its war with Japan - may have been as important in shaping the world we live in today. The triumph of the small Japanese navy over the imperial might of what was then regarded as a European power fired an entire generation of Asian leaders. Jawarharlal Nehru, Mohandas Gandhi, Sun Yat-Sen, Mao Zedong, the young Kemal Ataturk and nationalists in Egypt, Vietnam and many other countries greeted the decisive conclusion of the Russo-Japanese war with ecstatic enthusiasm. "And they all drew the same lesson from Japan's victory", Pankaj Mishra writes. "White men, conquerors of the world, were no longer invincible."

The point did not go unnoticed by the imperial powers. Lord Curzon, viceroy of India, noted that "the reverberations of that victory have gone like a thunderclap through the whispering galleries of the East". The world wars that followed deprived Europe of much of what remained of its authority in Asian eyes. "In the long view, however," Mishra concludes, "it is the battle of Tsushima that seems to have struck the opening chords of the recessional of the West".

Mishra is well placed to explore the contradictions and paradoxes of the interplay between east and west. Based in London but living part of the time in India where he was born and grew up, he views the rise of Asia from a standpoint that pierces through the illusions that have shaped perceptions and policies on both sides. In From the Ruins of Empire: the revolt against the west and the remaking of Asia, a deeply researched and arrestingly original mix of biography and historical analysis, he focuses on some of the intellectuals who led the Asian revolt against the west. Jamal al-Din al-Afghani (1838-97), a cosmopolitan figure, first defined Islam as anti-western. Liang Qichao (1873-1929), a widely influential journalist, attacked western materialism and defended Confucian ideals. Rabindranath Tagore (1861-1941) also criticised Asian leaders for promoting western models of development at the expense of their own traditions.

As Mishra points out, such critics of western-style modernisation did not go unchallenged. Many Asian writers and activists believed it was necessary to adopt western methods and values if they were not to be forever under the west's heel. The need for Asian countries to adopt western models of statehood in order to avoid being crushed being crushed by western power is at the heart of Mishra's story. It is an ironic and in some ways tragic tale. Partly inspired by one of the great neglected books of the last century - Edmund Stillman and William Pfaff's The Politics of Hysteria (1964), a prophetic analysis of the ambivalent victory of the modern west - Mishra argues that the malign effect of European imperialism extended beyond economic exploitation.

That was certainly important: India and China were in many ways more advanced and prosperous than the west before the two countries' development was curtailed by European control. But more malignant, Mishra argues forcefully, was the impact of a European model of the polity Asian countries found themselves being impelled to impose on themselves - the unitary nation-state.

Japan was the most successful, at least until its interwar excursion into militarism, but the result elsewhere has been highly ambiguous. In the case of China- a far more diverse country - the result has been to replicate, on a larger scale, the forced cultural homogenisation imposed in European countries during their periods of nation-building. By following this path, Asian countries have been able to challenge the west. But the costs have been substantial. They are likely to loom even larger as economic growth continues and Asian powers are impelled to compete with one another, much as European powers did, in a fierce struggle to secure control of natural resources.

With no comforting message, From the Ruins of Empire is an assault on false consciousness and self-deception in both east and west. Europe and America are stuck fast in the grip of cognitive dissonance. Unwilling to accept that the rise of Asia is actually a return to the more normal world of a few centuries ago, they are stubbornly asserting their continuing primacy in a succession of gruesomely pointless wars.

Especially in the US, where a consensus across the political spectrum insists that American decline is entirely self-inflicted, the irreversible shift is denied. The upshot of China's experiment in state capitalism is as yet unclear, and many countries that have risen on the back of the post-Mao boom will suffer badly if China falters. That will not restore western hegemony, which is gone for good. Over-indebted, essentially insolvent states cannot also be great military powers, intervening in neo-imperial style. But the retreat of the west is unlikely to bring peace, for the Asian powers have their needs, rivalries and scores to settle.

"The war on terror," Mishra concludes, "has already blighted the first decade of this century". In retrospect, it may seem a mere prelude to... bloodier conflicts over precious resources". The rise of Asia is a great achievement; but also "the bitter outcome of the universal triumph of western modernity, which turns the revenge of the East into something darkly ambiguous". Mishra's sober realism will provoke some sharp criticism - not least in his native India, where the idea that advancing Asian countries are fated to repeat the conflict-ridden history of the west will be indignantly dismissed. But precisely because it spares no one, this penetrating and disquieting book should be on the reading list of anybody who wants to understand where we are today.

John Gray's latest book is 'The Immortalisation Commission' (Penguin)