Faber & Faber, £14.99, 664pp. £13.49 from the Independent Bookshop: 08430 600 030

The Emperor of Lies, By Steve Sem-Sandberg, trans. Sarah Death

The obscenity of the past" (Hilary Mantel's phrase) is a non-negotiable part of history, but some pasts are worse than others. The extreme awfulness of Nazi-dominated Mitteleuropa during the 1930s and 1940s is now brought back to life in The Emperor of Lies, a book that confronts us with the extinct world of cruelty that was the Jewish ghetto in Lodz. Steve Sem-Sandberg recreates the ghetto with intelligent meticulousness and passionate invention. His novel is full of character and incident, but told by an omniscient narrator accordingto rules almost as strict as the classical unities.

The place is the ghetto. News from the outside filters in via peoplewho smuggle messages and newspapers, pick up broadcasts or simply pass on gossip (everyone hungers for news –Was neues?). The time coincides with its birth and death: December 1939 to January 1945. With the exception of rare flashbacks illuminating some of the characters, the storylines begin and end within these dates. The action is very varied, despite the unvaryingdominance of suffering and death, but centres around one man, on whose presence the entire structure rests. He is the Jewish Elder and "Chairman" of the ghetto, Chaim Rumkowski – aka the Emperor of Lies.

Did Rumkowski deserve the title? Was he that bad? A monstrous ego, someone who peddled deceptions to stay on top – a "man of titanic ambition", as the blurb puts it? Hardly; for one thing, less than two years after being appointed Jewish Elder, ie senior placeman, by the Germans, he is forced to make a proclamation that annihilated any pretence of independence, let alone power: "[We must] deport more than twenty thousand of us... among them, our children and our old people".

The book begins with reportage, complete with eyewitness accounts, of the September day in 1942 when Rumkowski announces that children under ten were to be sent to an unknown destination – like the old and the ill, the very young were unbrauchbar, useless. Later, the sequence of events is described in words which ache with pain. The Chairman's long address is as moving and disturbing as anything I have ever read. "It is a broken man you see before you... I implore you: give me these sacrificial victims in order that I might save others from being sacrificed." At the time, he knew that the Elder of the Warsaw ghetto had taken cyanide rather than oversee the deportation of children; choices come no starker then this.

True, Rumkowski comes across as profoundly unattractive: pompous, vain, insecure and perverse. Even his passionate fondness for children is tainted with selfish neediness. For a few years, though, it looked as if his bargain with the Devil might have worked on its own desperate terms. He created an industrial economy from the nothingness that was the ghetto and genuinely hoped that this would save at least some of "his Jews". The Germans, beneficiaries of their productivity, recognised its worth and, at one point the SS itself became interested in a takeover. Of course, in the end Rumkowski is a total loser. But, in the end, everyone is a loser here.

With this book, Sem-Sandberg steps into the magic circle of leading European writers. The Swedish former foreign correspondent, based mainly in Prague, has written several very good novels, three set during dramatic periods in Central European history. But for all the praise of his work, and a liberal scattering of prizes, it was his tale of the Lodz ghetto that took off in a way most authors can only dream of. At home, it was selling fast before a near-unanimous jury awarded it, despite heavy competition, Sweden's grandest literary prize.

By now, sales have passed 120,000, a fabulous figure in a country where 3,000 copies is an unofficial target. Abroad, too, Sem-Sandberg's book has been received exceptionally well. Publishers in 24 countries have acquired translation rights and an international success is a foregone conclusion. Why should that be?

The painstaking knowledge of how the place looked and functioned lends a Robinson Crusoe-esque appeal to the account of how skill, hard work and ingenuitywere pitted against terrible odds. People's actions faced with existential choices are variously uplifting, moving, thought-provoking and chilling. An ambivalent moral sense was not just a Rumkowski speciality; the ghetto held a representative selection of time-servers, crooks, traitors and sadists. When the Nazi masters intervene, they are consistently awful beyond outrage.

The moral dilemmas and the evocation of the period would alone add up to a challenging and fascinating narrative, but one we have met in other books. It is the humanity of the storytelling, so rich and vivid and yet under such complete control, which entices the readers of this dark book. The stories are told with a wealth of expressions, jokes, poems and rituals in Yiddish. They seem to capture Jewishness, not just in their contexts, but in the shifts between pitiless realism and grim humour. The calm voice of the narrator, restrained even when trembling with revulsion, never loses its undertone of irony. All this is precisely and fluently caught in Sarah Death's excellent translation, which also handles the many inclusions of alien language with great confidence.

Some stories are set-pieces, bitterly funny episodes from concerts and industrial-product shows. Some take a couple of pages to tell, like the one about the crazed woman who wanted to get shot but had to dance for the bored guard before he obliged. Others wind their way through several chapters, like that of young Adam Rzepin, would-be ace smuggler with a conscience and almost-survivor. Or, like the story of Rosa Smoleñska, the orphanage nurse whose charges were taken from her, but who never lost her capacity for kindness.

The life of Vera is close to the heart of the book. She is a pretty young Czech woman who arrives in a mass transport (people are forever shunted in and out of this hell-hole). She and her cultured family are appalled, but adapt. Vera is recruited into the Chairman's 14,000-strong administration, and attached to the Department of Statistics, a unit charged with record keeping. She is set to work on library duties in the basement housing the ghetto's illegal collection of books; thousands, of all kinds. Her job is dangerous and becomes more so when she begins to deal with information from the outside. She sorts and hides cuttings from smuggled newspapers inside the books; listens to broadcasts on clandestine, crackling radio sets, translates and transcribes. Vera and Aleks, her emaciated, intense friend and controller, are Keepers of News – a high-end commodity, up there with potatoes and firewood, delivered by a crew of insanely brave initiates.

As death puts an end to one storyline after another, the archive remains. Deep under the Department of Statistics, history lurks, coded and filed away, secreted inside mouldering volumes of outdated atlases and tattered prayer-books. With the help of the educated Jews arriving from the Reich, the files on births and deaths, on work permits and criminal convictions, grew the Lodz Ghetto Chronicle: a mass of paper of a historical importance rivalling the documents recovered from the Warsaw ghetto. It is also the source of Sem-Sandberg's masterly novel.

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