The notion that the formerly mighty American publisher Reader's Digest would allow the Chinese Communist party to censor its novels would once have appeared so outrageous as to be unimaginable. In the globalised world, what was once unimaginable is becoming commonplace, however. The Australian novelist LA (Louisa) Larkin has learned the hard way that old certainties no longer apply as the globalisation of trade leads to the globalisation of authoritarian power.

The fate of her book is more than a lesson in modern cynicism. It is the most resonant example of collaboration between the old enemies of communism and capitalism I have encountered.

Larkin published Thirst in 2012. She set her thriller in an Antarctic research station, where mercenaries besiege a team of scientists.

Larkin was delighted when Reader's Digest said it would take her work for one of its anthologies of condensed novels. Thirst would reach a global audience and – who knows? – take off. Reader's Digest promised "to ensure that neither the purpose nor the opinion of the author is distorted or misrepresented", and all seemed well.

One of Larkin's characters trapped in the station is Wendy Woo, a Chinese-Australian. Woo fled to Australia because the Chinese authorities arrested her mother for being a member of the banned religious group Falun Gong. Larkin has her saying that she had not "learned until much later of the horrific torture her mother had endured because she refused to recant".

State oppression in China is not a major theme of a novel set in Antarctica. But Larkin needed to provide a back story for Woo and a link between her and the villains of her drama. In any case, she was a free author living in a free country and was free to express her abhorrence of torture and the denial of freedom of conscience. Or so she thought, until she discovered last week that she was not as free as she thought.

The cost of printing makes up the largest part of the price of book production. Publishers have outsourced manufacturing to China, like so many other industries have done. The printing firm noticed the heretical passages in Larkin's novel. All references to Falun Gong had to go, it said, as did all references to agents of the Chinese state engaging in torture.

They demanded censorship, even though the book was a Reader's Digest "worldwide English edition" for the Indian subcontinent, Australia, New Zealand, Malaysia and Singapore – not, you will note, for China.

Phil Patterson from Larkin's London agents, Marjacq Scripts, tried to explain the basics for a free society to Reader's Digest. To allow China to engage in "extraterritorial censorship" of an Australian novelist writing for an American publisher would set a "very dangerous precedent", he told its editors. Larkin told me she would have found it unconscionable to change her book to please a dictatorship.

When she made the same point to Reader's Digest, it replied that if it insisted on defending freedom of publication, it would have to move the printing from China to Hong Kong at a cost of US$30,000.

People ask: "What price liberty?" Reader's Digest has an answer that is precise to the last cent: the price of liberty is US$30,000. The publisher, from the home of Jefferson, Madison and the first amendment, decided last week to accept the ban and scrap the book.

Globalisation has turned the world upside down. Reader's Digest was so anti-communist in the cold war that its enemies muttered that the CIA might as well have been funding it. They sneered at its middlebrow manners as much as its politics – "I mean condensed novels for Christ's sake."

In 1982, the sight of Solidarity, a genuinely working-class movement, rising against the Soviet occupation of Poland, disoriented the western left. Susan Sontag, who knew how to hurt when she had to, wiped the smiles from a few lips by raising the despised Digest. At a meeting at New York town hall attended by the publisher of the Nation, and many another eminent figures from the American left, she told her listeners that they had been so keen to defend the victims of McCarthyism and American capitalism that they had forgotten about the victims of Soviet communism.

Imagine if you will, she continued, "someone who read only the Reader's Digest between 1950 and 1970 and someone in the same period who read only the Nation or the New Statesman. Which reader would have been better informed about the realities of communism? The answer, I think, should give us pause. Can it be that our enemies were right?''

The audience booed her. But although you can find many on the left as indifferent to universal human rights today, I'll say one thing for them: no one can smack them over the head with Reader's Digest now.

During the cold war, business had to be anti-communist. The communists wanted to take capitalists' money and, on occasion, to kill them too. Since the fall of the Berlin Wall and the rise of the state capitalist dictatorships in Russia and China, defending free speech, defending even the right of an author to criticise torture in passing, may risk the chance to profit. For if China offers the cheapest printers and a huge market, who wants to alienate its leaders? No one, if the grotesque spectacle of the "market focus on China" at last year's London Book Fair was a guide. The British Council and the British book trade kept the Communist party sweet by refusing to invite any Chinese "visiting authors" whose work had upset the regime.

When the Chinese Communist party was Maoist, Reader's Digest denounced it. Now it guarantees profits, Reader's Digest censors on its behalf. When Putin was in the KGB, bankers, lawyers and industrialists deplored the old Soviet Union. Now Putin is in the Kremlin, they ensure that the first aim of David Cameron's advisers in the Ukraine crisis is to do nothing that might "close London's financial centre to Russians".

Everyone knows LP Hartley's line: "The past is a foreign country: they do things differently there." If that were ever true, it isn't now. For most people, the present is foreign and frightening. The intellectual left that Sontag so magnificently upbraided in 1982 had little real power. You only had to look at it to see that.

By contrast, the publishers, banks and corporations, who have taken over the role of deferring to Moscow and Beijing, have power and money and the ability to use both.