When Iggy and the Stooges collapsed in the late 1970s, Iggy hitched a ride with David Bowie, while guitarist James Williamson went off to study calculus. Now, amazingly, they are gigging again. Will Hodgkinson meets both parties of a reckless reunion. Plus, Alexis Petridis on Raw Power, the band's landmark album

The Rainbow Bar and Grill on Sunset Strip has, to put it kindly, seen better days. Its clientele today consists chiefly of grizzled former roadies, ageing 80s hair-metal bands still waiting for their moment, and greying women who appear to view Pamela Anderson as the pinnacle of taste and sophistication. But in late 1973 it was the only place to be in Los Angeles, and this was where David Bowie, Iggy Pop and James Williamson met for dinner to celebrate the completion of Raw Power, the third album by Pop and Williamson's proto-punk band, Iggy and the Stooges.

"Bowie turned up with his bodyguard, despite the fact that he wasn't hugely famous yet," says Williamson, a sober-looking 60-year-old who has, via a bizarre turn of events, found himself playing guitar with the Stooges once more, after a 37-year hiatus. We are standing in the semi-gloom of the Rainbow's tarnished interior as Williamson points out the vinyl-upholstered booth where the historic dinner took place. "As for Jim [Osterberg], he was busy trying to create his Iggy Pop persona, which was difficult because he wasn't famous at all."

Raw Power bombed on its release, but it has since been acknowledged as one of the most influential records in rock history. For the last few decades, however, the man who gave Raw Power its air of menace has been something of a mystery. James Williamson joined the Stooges in 1971, when they were at their lowest ebb after two commercially disastrous albums and the development of serious drug habits. Photographs of Williamson at the time depict a dark, brooding presence; a juvenile delinquent in platform boots. When he disappeared from view in 1977 it was assumed he had either died of a heroin overdose or gone off the rails entirely.

In fact, he did nothing so cliched. Until taking early retirement late last year, Williamson was vice president of Sony Electronics. For the last 30 years he has lived with his wife and children in Silicon Valley, California, working from nine to five and wiping his shoes on the doormat each evening after a hard day's work at the cutting edge of technology. "I gave up being a Stooge to study calculus," he explains over a beer at the Rainbow. "I designed computer chips, working with geeks who had no idea about my past and who wouldn't have heard of the Stooges."

The story is all the more remarkable for the fact that Williamson is one of the great rock guitarists, having carved out a sound that is at once threatening and glamorous. "I'm his biggest fan," says Johnny Marr, late of the Smiths, who as the pre-eminent guitar hero of his generation carries some authority. "He has the technical ability of Jimmy Page without being as studious, and the swagger of Keith Richards without being sloppy. He's both demonic and intellectual, almost how you would imagine Darth Vader to sound if he was in a band. When I heard rumours that James had got involved with computer chips, I could only guess he had become a cyborg."

"The first time I heard him play," says Iggy Pop, "which was in a basement in Ann Arbor, he did something that later became known as punk or speed metal – a great number of chords, almost all at once – but which at that time came from no known musical vocabulary. His playing had dirt, but it did not lack authority. You could hear the intelligence in it."

What did Pop make of his new guitarist? "Somebody once wrote that James's guitar style sounds 'distinctly unfriendly'," he says with a laugh. "Let's just say that James was not the most friendly person I'd ever met. But I wasn't paying too much attention to him as a person, only as a guitar player."

Tempting as it may be to imagine a baby James Williamson snarling out of his mother's womb with a cigarette hanging from his infant lips and the riff to Raw Power in his head, he was born to a reasonably normal family in 1949 before growing up into what Iggy has described as "a troubled youth from the Detroit area", spending time in reform school along the way. Williamson joined the Stooges after bumping into Iggy Pop, whom he already knew, at the Chelsea Hotel in New York. The band quickly collapsed under the weight of drugs and dashed expectations, but a year later, when Williamson was living on his sister's couch in Detroit, recovering from hepatitis A, he got a call from Iggy to say the band had been given another chance.

"I had nothing to look forward to," Williamson says. "I had no money, no prospects. Then Iggy calls and says David Bowie wants him to come to London to make an album, and that he's not going without me. We get a contract for £10,000 – a huge amount of money back then – stay in Kensington Gardens Hotel, and hang out with people that drive Bentleys. We go from absolute poverty to the lap of luxury. It was amazing."

It was also productive. After trying out English musicians and finding them wanting (Willamson calls them "a bunch of sissies"), Williamson and Pop arranged for the Stooges' original guitarist and drummer, Ron and Scott Asheton, to fly over from their home in Ann Arbor, Michigan and complete the muscular lineup, with Ron moving to bass. The band wrote and practised constantly during their six months in London. Iggy reputedly came up with the famous opening line to Raw Power's opening track, Search and Destroy – "I'm a street-walking cheetah with a heart full of napalm" – under a tree in Kensington Gardens, high on Chinese heroin. Williamson remembers it differently. "We didn't know where to get any hard drugs in London. The most we could score was a bit of pot. So we got our heads down and worked, realising this was a shot at being a real band."

As it turned out, Raw Power was ill fated from the start. "When Iggy and I showed up at the airport we were so undesirable that customs officials wanted us to get straight back on the plane. It was only when [Bowie's manager] Tony DeFries turned up that they actually let us into the country."

There was also the problem that Bowie and DeFries really only wanted Iggy. "DeFries was in the business of making pop stars," says Williamson. "But Iggy brought me over, and then we brought the Ashetons over, and so now it's the Stooges, who nobody in their right minds would want as pop stars. Then Bowie got big and they forgot about us. We were left with no adult supervision."

"That was by no means particular to DeFries," confirms Pop of Williamson's assertion that the manager wanted the singer, not the band. "That was what the label wanted, what the booking agents wanted. All of the Stooges were big characters. They weren't the easiest guys to manipulate."

The one and only concert the Stooges played during their stay in London was at the Kings Cross Cinema, now the Scala, in June 1972. Noting how glam rock bands presented themselves, Iggy and co decided they needed a striking look for their UK debut. So they headed off to a joke shop and bought clown makeup. On the back cover of Raw Power is a photograph of Williamson at the concert, looking extremely pale. That is because he went overboard with the pan stick shortly before going on stage. Iggy, meanwhile, put on a performance so shocking that DeFries all but ensured the Stooges would never play in the UK again.

"The audience was terrified, with Iggy climbing all over them, and management decided we would get arrested if we did any more shows," says Williamson. "And apart from Bowie, nobody really got us anyway. We didn't help people get us. We made it up as we went along."

The result was a band the world was, frankly, not ready for. Iggy Pop's malodorous lyrics ("Gimme danger, little stranger, and I will feel your disease") were mirrored by Williamson's wild, complex guitar style, which sounds, if you can apply such a word to music, unhygienic. "It makes you think of a monster from a swamp – in makeup," says Marr. "James's riffs sound dead cool, but you don't get that good by goofing off. There's thought going on behind the swagger."

DeFries rejected every recording the band made. When the Stooges left London for Los Angeles in October 1972, DeFries got Bowie to produce and mix Raw Power in a last-ditch attempt to create something vaguely palatable for the record-buying public. "DeFries called in his golden boy to salvage the album at Western Studios on Sunset," says Williamson. "We've been grousing about the mix Bowie did ever since, but we can't complain too much because we were in the studio when it was done. And the truth is that Raw Power would never have been released had it not been for Bowie."

After Raw Power's release, the Stooges embarked on a disastrous tour of the US that, according to the late Ron Asheton, was like "beating a dead horse until it was dust". It ended on February 1974 at the Michigan Palace in Detroit, when a gang of bikers beat up Pop after he challenged the entire audience to a fight – the show is captured on the legendary bootleg album Metallic KO, described by the critic Lester Bangs as "the only rock album I know where you can actually hear hurled beer bottles breaking against guitar strings". Williamson and Pop returned to Los Angeles in the hope of kickstarting their musical careers once more, but by then pretty much all was lost.

While Williamson seems sanguine about its initial failure, Pop clearly feels that Raw Power's current status as a classic album is long overdue. "I felt that if the 14-year-olds could hear it, if the real, smart music fans could hear it, they would get it," he says. "Maybe I was being unrealistic, but it always felt like the album I had to make."

"After that, Iggy wanted to take it to the edge," remembers Williamson, who was by this point living in an apartment on the Sunset Strip, next door to the Hyatt House Hotel. "He took any crap he could get hold of and it whacked him out. He was at my place, then he was at his girlfriend's, and then nobody wanted him so he was on the street. He was despondent and desperate. He couldn't manage his life anymore, so he did the right thing and checked into a mental hospital."

The pair made a final attempt to get another deal by making a series of recordings in 1975. It didn't work, although the tracks were eventually released as the 1977 album Kill City. "Here we are, my singer is in hospital, nobody is knocking on our door or even answering our phone calls, and nothing has worked out," says Williamson. "Then Bowie takes Iggy under his wing and off they go to Europe. So that was that."

Bowie and Pop relocated to Berlin and made some of the most creative albums of their careers: The Idiot and Lust for Life for Pop; Low, Heroes and Lodger for Bowie. Meanwhile, Williamson was left high and dry. So he went back to school. He studied electronics and, apart from a rare foray to the studio to produce Iggy's 1979 album New Values, he gave up on rock'n'roll. Soon after becoming a father he landed a job at a pioneering microchip company, Advanced Micro Devices, leading to engineering work at Sony Electronics. He didn't go near a guitar for the better part of three decades. His son referred to the collection of vintage guitars gathering dust in the family living room as "the coffins in the corner".

"It turned out to be an amazing time for me," says Williamson, animated at the memory. "I was involved in the explosion of the computer boom, working with brilliant people, and it was a lot more exciting than rock'n'roll, which I felt had reached a plateau. I'd be myself, asking questions like, 'Isaac Newton – how did he come up with that?'"

Williamson never mentioned his old life to his colleagues. While Iggy Pop became a worldwide superstar, Williamson made personal computers user friendly. The only clue to his whereabouts came on a line from Pop's 1977 song The Dum Dum Boys, a tribute to his old gang, which contains the line: "What about James? He's gone straight."

As the Stooges' place in rock history became appreciated, however, Williamson's old life came back to haunt him. At first it was the occasional fan or journalist trying to track him down. Then in 2007, responding to the cult that had built up around the Stooges since their demise, Pop decided to get the old band back together. The Asheton brothers heeded the call but Williamson explained that, being a top-ranking executive at Sony, he wasn't really in a position to take off around the world and crank out ultra-malevolent rock riffs when there were board meetings to attend.

Then events were to take a turn for the surreal. In February 2009 Ron Asheton died of a heart attack, not long after the Stooges' triumphant reunion tour. A few months later Williamson got a call from Pop, who wanted to play Raw Power in its entirety, live, for the first time. "I told him I had a full-time job and couldn't do it. Then the recession caught up with Sony and they offered me early retirement. And then I remembered the Stooges."

"Not that his family are particularly interested in their old man's youthful folly. "My daughter couldn't care less about the Stooges," he says, laughing. "My son got interested when he went to college and his friends were into the band, but my wife has disliked the Stooges ever since coming to see us at the Whisky back in 74. We aren't for everyone."

Williamson compares himself to Rip Van Winkle, waking up after a long sleep to discover a changed world. Pop is now an ultra-smart professional who knows how to put on a brilliant show. Raw Power is a huge album. And soon after relearning the riffs he came up with back in 73, Williamson was playing to big audiences for the first time in his life; his debut gig was in São Paulo last November, in front of 30,000 people.

"All we're doing now is finishing off a job," says Pop of the Raw Power tour. "And I'm pleased to report that James has now learned to use his intelligence in balance with his more impulsive, aggressive side."

"It's really strange to be doing it now," Williamson says. "We're basically pensioners. It's fun, but nobody wants to get so old that playing rock'n'roll becomes a joke." That never stopped the Rolling Stones, but you can see his point.

The rebirth of Williamson is one of the more heartwarming stories in the brutal world of rock'n'roll. Does he have any regrets at leaving it all behind for so long? "You know, last night I met Slash," Williamson says with a smile. "He was a really nice guy, but you have to ask yourself, when he doesn't play guitar, what does he do? I look back at everything I've done and think, it worked out OK."

Alexis Petridis on how nothing can prepare you for your first listen to Raw Power

Raw Power is an album preceded by its reputation. At first, that reputation was as a monumental disaster. Intended to revive a career you would have described as dying had it ever shown any signs of commercial life in the first place, it succeeded only in hammering the final nails into the Stooges' coffin. Muddily mixed by David Bowie, Raw Power was adduced either as evidence of a hitherto-unnoticed fallibility on the part of its patron, or of Iggy Pop's unfailing ability to screw up every opportunity presented him: only "the world's forgotten boy", as he styled himself on the opening track, Search and Destroy, could hook up with the planet's hottest rock star and emerge with his reputation in worse shape than before. Either way, within months of its release, the Stooges were reduced to playing the kind of gigs you hear on the notorious live album Metallic KO, shows people attended specifically in order to jeer and throw things: "You can throw your goddam cocks for all I care," snaps Iggy.

Within a couple of years, however, Raw Power's reputation had changed to one of vast importance. In his history of punk, England's Dreaming, Jon Savage claimed you need hear only two records to understand the genre: one was the Sex Pistols' Never Mind the Bollocks, the other Raw Power.

Whatever its reputation, nothing can really prepare you for the experience of hearing Raw Power. Over the years, Pop has tended to describe the album not in terms of music, but violence. On one occasion he explained its sound to a journalist by wordlessly smashing a glass; on another he noted "that band could kill any band at the time, and frankly can just kill any of the bands that built on this work since". He has a point, although you might point out that, based on the opening seconds of Search and Destroy, the Stooges play not as if they're ready to kill every other band, but as if they're on the verge of killing each other: every member seems locked in, desperate struggle to drown the rest out. Over the top, in every sense of the phrase, Pop howls one of the greatest opening lines in rock history: "I'm a street-walkin' cheetah with a heart full of napalm", a lyric that would sound utterly ridiculous coming from anyone else, but which he delivers with convincing urgency. Almost immediately, however, the swagger vanishes, replaced by a palpable panic and distress; for all the heroic look-out-honey strutting, something is clearly desperately wrong here. "Somebody's got to help me, please! Somebody's got to save my soul!" he howls, a man who can't decide whether he's revelling in his own nihilism, or just terrified.

All that, it should be noted, takes place within the first minute of Raw Power. What's remarkable is that it maintains that level of musical and emotional intensity for another half an hour. It's as purely, viscerally thrilling as the earliest rock'n'roll, but deeply unsettling listening at the same time. It's not for want of trying, but almost 40 years on, there's still nothing in rock music quite like it.

Raw Power: Legacy Edition is released on 13 April on Sony Legacy. The Stooges play Raw Power at Hammersmith Apollo, London, on 2-3 May