The image that came to Salman Rushdie, around which he would build his new novel, was an enclosed garden in downtown Manhattan. It is a space that exists in real life (although, as one of the characters in The Golden House observes, real life is a category from which it is increasingly hard to distinguish less reliable entities) and with which Rushdie is familiar; old friends inhabit one of the houses backing on to the garden. “The idea of there being a secret space inside this noisy public space,” he says. “I had this lightbulb moment that it was like a theatre – with a Greek tragedy, amphitheatre quality – where the characters could enact their stories. It also had a Rear Window quality, of being able to spy on everybody else’s lives. At that point, the Golden family decided they wanted to move in.”

We are in the offices of Andrew Wylie, Rushdie’s agent of 30 years – “my longest relationship!” he says gleefully – a mile north of Rushdie’s apartment in lower Manhattan. He is looking particularly Rushdie-esque today: part rumpled intellectual, part something less sober. At 70, Rushdie has had more public incarnations than most writers of literary fiction – brilliant novelist, man on the run, subject of tabloid scorn and government dismay, social butterfly, and, in that singularly British designation, man lambasted for being altogether too Up Himself – but it is often overlooked what good company he is. His humour this morning is not caustic, nor ironised, nor filtered through any of the more protected modes of engagement, but is a kind of jolliness – a giggly delight – that simply makes him a good laugh to hang out with.

The Golden family are transplants to New York from Mumbai (or “Bombay” as the author continues to call it in conversation, with what feels like particularly Rushdian obstinacy), an outlandishly wealthy father and his three dysfunctional sons in flight from a personal tragedy; the loss of their mother during the 2008 Mumbai terror attacks. We never discover their “real” names; on arriving in the US, the patriarch renames himself Nero Golden – Rushdie, anticipating a collective eye-roll perhaps, points out in the novel this is no more ridiculous a name than Huckleberry Finn or Ichabod Crane – and tests the principle that the US is a place where one can leave one’s past at the door. It is an issue with which Rushdie is intimately familiar; the split in identity, the ability to shed one’s skin after a trauma and potentially skip off scot-free, and he explores both the impossibility and, ultimately, the undesirability of this. That the novel opens with the inauguration of Barack Obama and closes with the election of President Trump, “the Joker” as Rushdie brands him, is the novelist’s reminder there is no progress in history that can’t be undone.

The biggest news of the day used to be that Charlie Sheen did cocaine. Now there are 10 colossal news stories a day

The week of our meeting last month, reverberations from the fascist march in Charlottesville are still being felt, along with myriad other stories from Trump’s White House. “I remember when there wasn’t that much news,” says Rushdie, “when the biggest news of the day used to be that Charlie Sheen did cocaine. Now there are 10 colossal news stories a day.” It would seem to be a bad time to be a novelist and if Rushdie’s new novel seeks to compete with real life, it is by retreating from the polemicism of so much news and social media to get inside a non-partisan reality.

There are a lot of topical references in The Golden House – from “no-platforming” and illiberal campus activism to the transgender debate and other iterations of identity politics, which Rushdie approaches as symptoms of a broader cultural change. “In America when you talk about identity issues, at the moment a lot of that is gender identity. If you’re in England, there’s this other argument about national identity, which was behind the Brexit catastrophe; and in India, when people talk about identity, they’re really talking about religious sectarianism. In all three places, the identity subject is colossal but it is understood completely differently. I was thinking about that, too.”

Although Rushdie is of a vintage inclined to get grumpy about aspects of the gender identity debate – the suggested replacement of he/she with a spectrum of alternative gender markers – he tried to remain open-minded. “I wanted to approach the subject completely not judgmentally, just get into it. What is it? All this language stuff. The 73 pronouns, all of that. I’m a writer, I should know this. The point was to enter into it as seriously as I could and present it without preachiness. And I think in real life that’s what’s happening; people are wrestling with it. And they don’t always resolve it properly for themselves.”

President-elect Donald Trump, left, and President Barack Obama arrive for Trump’s inauguration ceremony in Washington DC, in January. Photograph: J.scott Applewhite/AFP/Getty Images

One of the novel’s protagonists works at the “Museum of Identity”, a mildly satirical invention that “I was very happy to have come up with”, says Rushdie, “and that I’m sure will exist in the next five years”. Meanwhile, Nero Golden’s youngest son, D, struggles to suppress his transgender leanings. “This modern obsession with identity revolts me,” says D. “It is a way of narrowing us until we are like aliens to one another. Have you read Arthur Schlesinger? He opposes perpetuating marginalisation through affirmations of difference.” This sounds less like the talk of the 20-something fictional character and more like the novelist addressing the reader.

Rushdie isn’t persuaded that solipsism on the left contributed to the rise of Trump, nor that economic disparity was the only cause. “I had a lecture gig in a city called Vero Beach in Florida: big audience, older people, quite affluent, very well educated, and almost all Trump voters,” he says. “Not at all the cliche of the ignorant blue-collar Trump voter. These were people with college degrees who’d had highly paid jobs, many retired, readers.” When the author mentioned climate change, he says, “this gentleman – they were all very courteous – disagreed with me and he said: ‘When you say that all the scientists agree on this, that’s not true.’ And I said: ‘Yeah, it is true actually.’ And he said: ‘No it’s not.’ And I said: ‘Sir, we can’t go on like this, it’s silly. But let me put it to you this way: if you say the world is flat, it doesn’t make the world flat. The world doesn’t need you to agree that it’s round in order to be round, because there’s this thing called evidence.’”

Did he get the impression these positions were held partly as a way to punish condescending liberals? “Well, I do think there’s some of that; this idea that the elite is now the educated class, rather than the wealthy class, so you’ve got a government with more billionaires in it than ever in history, but we’re the elite – journalists and college professors and novelists, not the ones with private planes and beach front properties in the Bahamas. It’s a weird time.”

I once sat next to the Trumps at a Crosby, Stills & Nash gig. Donald Trump knows all the words to ‘Woodstock’!

Rushdie has been in the US for more than 15 years, but he is still on the outside, a survivor, or beneficiary depending on your view, of a double displacement, first as a child moving from India to England to attend boarding school and then as an adult, when he left London for New York in 2000. It is a gift, he says, “to feel really connected to three places”, and it has nourished his fiction. The 70th anniversary of partition this year reminded one of the startling effect of Midnight’s Children when it was published in 1981, Rushdie’s second novel that is still unmatched for exuberance and a sense of talent unleashed. His third novel, Shame, cemented his reputation, since when he has produced novels ranging wildly across the spectrum between here and there, now and then, fantasy and reality. Fury, Rushdie’s 2001 novel, was a less intimate portrait of New York than The Golden House, his panoramic social novel of the city. While his two sons, Zafar, who is in his late 30s, and 20-year-old Milan, both live in London, Rushdie feels his roots in the US have deepened enough to get inside the city with something like the assurance with which he tackles London and Mumbai. (His youngest son, meanwhile, is threatening to move in with him in New York, as 20-year-olds will, reminding Rushdie that “children take up a lot of time and brain space”. He smiles. “But on the other hand, there are rewards.” )

And of course Trump came as a great shock. Rushdie recalls sitting next to him in Madison Square Garden many years ago, at a Crosby, Stills & Nash concert, accompanied by “the then much younger Ivanka and the disgusting boys. And the thing that surprised me was that he was on his feet and knew all the words to all the songs. Donald Trump knows the words to “Woodstock”?!”

Setting the novel against the backdrop of the years preceding Trump’s election was not only a way of creating an elegy to the Obama era, but of suggesting that Trump didn’t emerge from a vacuum. “One of the reasons why I think it was possible to write the book is that a lot of what Trump represents and unleashed was there anyway, if you were looking properly, and would not have been destroyed by his defeat. Once you take the cork out of the bottle, things fly out.”

And while the rise and fall of Obama’s US – “the journey from that moment of optimism to its antithesis” – gave the novel a structural symmetry that has, says Rushdie, “horrible to say it, but a formally pleasing quality”, he is clear of the connection between then and now. “A big chunk of white America has been unable to stand the fact that for eight years there was a black man in the White House. Couldn’t stand it. And unfortunately Hillary was a bad candidate, and I think everybody underestimated, including me, the incredible hatred for her, including among leftwing people, young people and women.”

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All successful people are status aware, but it is a rather endearing quality in Rushdie, who is either disinclined or unable to disguise it. It was there in Joseph Anton, his 2012 memoir (the title is the pseudonym he assumed while living for 10 years under the fatwa) and in which his willingness to appear in less than flattering light – going on bitchily about his ex-wives, grumbling about protection officers calling him “Joe”, documenting the end of his marriage to Elizabeth West and the infatuation that led to his marriage to Padma Lakshmi – made it a more revealing memoir than most, although it was hard to know, at times, whether this was due to a surfeit of self-awareness or its opposite.

‘I have an itch to get outside the bubble’ … Salman Rushdie. Photograph: Tim Knox for the Guardian

When he first joined Twitter, he says, “one and a quarter million people rushed in my direction. Which sounds like a lot until you look at people who really have a lot – Stephen Fry, Neil Gaiman, and so on, and that’s before you get to the real aristocrats, Justin Bieber, Kim Kardashian, the gods.” He giggles. “Even down here among writers a million people is a lot, so that was nice, to feel that you were having a conversation with a lot of people who were interested in you and your work, because it’s a self-selecting group.”

Twitter suited Rushdie, his belligerence and his sense of fun. He rolled up his sleeves and got stuck into fights and responded to people with puny numbers of followers. He was funny and generous and not at all like the popular view of him as pompous, plaintive, pain-in-the-arse Rushdie. Then, as has happened with many early fans of the platform, “I began to really dislike the tone of voice of Twitter. This kind of snarky, discourteous, increasingly aggressive tone of voice. I just thought I don’t like this. These people would not speak like this if they were sitting in a room with you. I had planned to stop earlier and then it was the election campaign and I got into it, and the last thing I tweeted was this pathetic tweet, having just voted: ‘Looking forward to President Hillary’.” He laughs. “After which total silence. And I thought, just stop, and I did and I haven’t missed it for one second.”

Too much exposure to strangers online can collapse one’s faith in humanity. In the novel, Rushdie refers to “synderesis”, the philosophical principle that people are born with an innate moral consciousness directing them towards good. Does he believe that? “I think there is an ethical sense,” he says. “I do believe that we’re born with a need to know what is right and wrong, which is why children accept the instruction of parents on the subject. We need to know what are the boundaries of good and bad behaviour in order to function in the world. I don’t think we automatically know what is right or wrong, but I think we have the desire to know.”

These are hard calls at the moment, when the very nature of reality and the meaning of “facts” are in dispute, long before one gets to the big existential questions. In the wake of Charlottesville, the issue for the left has been to what extent should one tolerate the intolerant and defend their right to freedom of speech. “I think the great boundary is to not tolerate people who would destroy the world that makes it able to tolerate people,” says Rushdie. “That’s the great mistake made in Germany during the rise of nazism, which was to allow it to rise through the ballot box and then abolish the ballot box. Something similar happened in Algeria, where the old administration thought that they would defeat the insurgent FIS [Islamic Salvation Front] and GIA [Armed Islamic Group] by letting them run for election and defeating them. Instead they ran for election and won and then abolished elections. There is a limiting point. If the thing that is happening would destroy the system that allows it to happen, that’s a deal breaker. I’m a huge admirer of and supporter of the ACLU [the American Civil Liberties Union, which defended the marchers’ right to protest] and I give them money and so on, but I think they might have been wrong about Charlottesville. I think when people are running over other people with motor cars, that’s not legitimate free speech. And they went there for a fight. And got it.”

This is, of course, the “provocation” argument which was directed at Rushdie during the years of the fatwa; “oh, well, he brought it on himself, he went looking for a fight and found it”. “Provocation” was also the word used by Francine Prose about the offence caused by some of the cartoons in Charlie Hebdo, the satirical French magazine. Along with other high profile members of PEN, she withdrew from a PEN event at which the magazine was to be honoured in 2015. “Provocation is simply not the same as heroism,” wrote Prose, a statement for which Rushdie attacked her on Twitter.

These weren’t just fellow writers, but old friends: Peter Carey, Michael Ondaatje and Prose herself, who had been Rushdie’s vice-president when he was president of PEN. “Those people were wrong,” he says now. “In light of what’s happened in France subsequently, I hope they’re embarrassed. Because it’s quite clear that people can get killed for anything. Get killed for going out to a club on Friday night. The idea that that particular group of people in some way called down their own damnation is not even tenable. It was a terrible division inside PEN and it’s left some very bad wounds; Francine and I don’t talk any more – and we go back.”

Rushdie won’t hold with the argument that the cartoons were racist. “There was a problem of taking up positions before they really looked for information. For instance, Le Monde had done a survey of Charlie Hebdo covers over a 10‑year period: 520 covers. And the number of covers that dealt with Islam was six. The number of covers dealing with Catholicism, or Israel, was much higher. But then hundreds and hundreds attacking the Front National and Sarkozy. So here you have this anti-racist, anti-state little paper, which is being accused of being an organ of the establishment and racist. The exact opposite of what it is. And I said: ‘Just look at this. And think again.’ And nobody thought again. I’d met one or two of the people who were killed and they were just these … sweethearts. These old, soixante-huitard lefties. And nobody read the fucking magazine.” He laughs. “Another big French survey showed that a very substantial majority of French Muslims identifies as primarily secular, and only a small minority identifies as religious. I thought: ‘Look at this; they don’t care. They have real issues of employment and racism and this isn’t the thing that’s attacking them.’ Anyway it was a horrible fight and it has left damage. I did patch it up with Michael O. I’ve been friends with Michael since 1980.” But no other fences were mended.

I hate it when the liberal progressive left become stupid. We are supposed to be smarter, they are supposed to be stupid

There is an assumption that Rushdie has been pushed to a more extreme position on Islam because of the years of the fatwa, something he finds irritating and belittling. He does react very strongly against bullying, but along with everything else at the moment, who is the bully and who the victim is a question on which no one can agree. Trump, he says, “is someone who has successfully bullied the country”, and there is bullying elsewhere on the political spectrum. Did it, I wonder, give Rushdie any satisfaction to see Germaine Greer, who was unsupportive of him during the years of the fatwa, be “no-platformed” for her remarks about transgenderism? “No, I felt sad for her. I felt it’s so stupid. I hate it when the liberal progressive left becomes stupid. Because we’re supposed to be smarter and they’re supposed to be stupid. I’ve known Germaine since the dawn of time, and we’re not close, but I thought that was stupid.”

Brexit has been depressing him, too. “It made me think I’ve been wrong about this place all this time. And I know, anecdotally, that rudeness towards people with brown skin and eastern European accents has exploded. People going up to people on the bus and saying: ‘We’ve voted now so when are you leaving?’ In the same way as Trump here has enabled the far right.”

Rushdie thinks he might like to write about the Other Side next; the part of the US that is, to those living in downtown New York, completely alien. “I have an itch to get outside the bubble. There’s such a rift in this country. Maybe you have to go to the other side of the rift.”

The Golden House, viewed as representative of a social class and wealth category rather than characters moving around a fictional space, may attract the remark “check your privilege”, which Rushdie responds to by saying of course that’s what people said about The Great Gatsby; “who cares about these rich people?”

They’ll still say it, I suggest. “Well,” says Rushdie, momentarily eliding into his image as impossibly grand, “read another book.” And he bursts into laughter.

• The Golden House is published by Jonathan Cape.