Adolf Hitler didn't do many favours for German culture. Goethe, Beethoven and Dürer will never be enough to lift the curse he put on it - not least because he praised them all. And that's before we start on Wagner. How many people go on holiday to see the art treasures of Nuremberg? There's as much artistic greatness in Germany as anywhere. But we don't want to know. Now there's a small exhibition of German art at Tate Modern that offers a way to recognise what we're missing. And, bizarrely, our excellent guide is the führer.

I've got to admit, I hadn't ever paid much attention to Karl Schmidt-Rottluff - he painted the kind of lozenge-eyed portraits and angular nudes that have always tended to blur into my vague image of "German expressionism". Schmidt-Rottluff's Frau mit Tasche (Woman with Bag), in the Tate show, looks innocent enough, if a little distorted. Then you see it - her face is hard and elongated, jutting in space, awkwardly placed on her body. There's something foreign here, and then you realise: this woman's head is an African mask.

To many spectators today, this might seem a comparatively gentle modernist work. But try to see its disorder, eroticism and racial impurity through Hitler's eyes. In 1937 Schmidt-Rottluff, one of the founder-members of the Dresden avant-garde group the Brücke - the Bridge - had more than 50 of his works exhibited in the most notorious art event of the 20th century. The Entartete Kunst - Degenerate Art - exhibition opened in Munich in July of that year. It was the most successful modern art exhibition of all time. In six weeks it had a million visitors, and a million more caught it on tour.

This is what all the hep people would be doing if the Nazis had won the war, said Hunter S Thompson of Las Vegas. What all the hep people were doing in Nazi Germany in 1937's summer of unlove was sneering at Schmidt-Rottluff's paintings - not to mention those of Ernst Ludwig Kirchner, Edvard Munch, Emil Nolde, Franz Marc, Lyonel Feininger and Marc Chagall.

It was shameful, and the Tate documents it as such. All the artists in this room had works in the Degenerate Art exhibition. Nolde's 1930 painting The Sea B is so German - a morbid, romantic landscape, echoing Caspar David Friedrich, or a Wagner prelude - and yet Nolde had no fewer than 1,052 works of his removed from German museums in 1937. His prominent inclusion in the Entartete Kunst exhibition baffled him all the more in that he was a Nazi.

The Tate show presents this story as tragedy; and of course it is. One great painter, Kirchner, committed suicide within a year of the Degenerate Art exhibition. The fascinating archive documents build up a picture of misery; the spiritual-minded Wassily Kandinsky writes of his confusion, as an apolitical person, about what is going on.

It's a story of defeat - but it could be told differently. It would be great to see a full-scale exhibition. In fact, it would be worth reconstructing the entire Degenerate Art exhibition. The restaging would, I suspect, profoundly alter our view of modern art. We would see how German it is.

There's a crucial aspect of the Degenerate Art exhibition I had never understood before. I always pictured it as a global denunciation of modernism. At the 1933 Nuremberg Rally Hitler lambasted futurism (despite its fascist affiliations) and dada. So I pictured the Nazi art connoisseurs marching contemptuously through rooms filled with Picassos and Duchamps . . . but that is not what it was like at all. The degenerates on view were mostly homegrown.

When Nazi art experts ransacked German public collections for anything modernist to put in the show, of course they grabbed plenty of treasures by Picasso and Van Gogh, to be sold abroad or destroyed. But Hitler had other views. He wanted to abolish German modern art.

Hitler's decree of June 30 1937, authorising Goebbels to ransack museums, specified "German degenerate art since 1910". Talk about knowing your enemy. Like a lot of failed artists, Hitler fancied himself an art critic - and in picking 1910 as the year when all the good old-fashioned values of realism and beauty had been brutally overturned in German art, he was right. That was the year German expressionists founded the New Secession in Berlin. Newspapers in that year were full of scornful attacks on the sensationalism of these young German artists - perhaps the would-be artist Hitler read the reviews.

The Degenerate Art show was not just an attack on modernism, it was an attack on a version of Germany. It was German artists Hitler denounced as sick: "In the name of the German people it is my duty to prevent these pitiable unfortunates, who plainly suffer from defects of vision, from attempting to persuade others by their chatter that these faults of observation are indeed realities and present them as 'art'."

And so, if we could put this exhibition back together again - which is impossible because it would mean resurrecting destroyed masterpieces such as Marc's Tower of Blue Horses - it would not be some disgusting exercise in Nazi kitsch. Despite its loathing and violence - because of its loathing and violence - Degenerate Art was the most revealing exhibition ever staged about German modernism. The fact this art was hated and even feared by Hitler is high praise. And what the Munich show catalogued was the subversive energy and revolutionary brilliance of the Germany killed by Hitler.

From now on, the world would not think of Germany as the nation of George Grosz and John Heartfield, of Hannah Höch's dada collages, but as a small-minded country of beer-swigging Bavarian mediocrity. Hitler won - in most people's perceptions, he has still won. The Tate Modern exhibit isn't big or bold enough to change that. But the Degenerate Art show had the power to change how we see Germany. Look how Hitler hated what Berlin really was - look at it his way.

German modern art was incredible. Schmidt-Rottluff is a perfect example - that disjunctive quality, a certain intellectual toughness, connects the icy fire of the expressionist palette with the dadaists who rebelled against expressionism itself. More than anywhere else, this art was confrontational - and there's the rub.

You might even say German artists were asking for it. French modernism, by and large, inhabits a world of its own, confident in its own significance. German artists could not draw on the Paris tradition of bohemia and knew they were a radical youthful minority in a nation of - as Otto Dix and Grosz depict it - crippled nationalist war veterans and drunken Prussians. German modern art wasn't accidentally fragmentary and disturbing; it set out to fragment and disturb. As the Nazi party fought for a new order, artists aggressively created disorder. In fact, if you want a word to unify all the currents in German modern art in the first three decades of the 20th century, then "degenerate" is quite good. But instead of abuse, this is a term of praise. Modern art has never looked as degenerate as it did in Germany before Hitler imposed his vision of banal beauty.

Ugliness is life and beauty is death, might be our conclusion, if we could really revive the Degenerate Art exhibition. Modern art is ugly - and alive. Hitler praised quiet landscapes and classical nudes, and he was death.

· Degenerate Art is at Tate Modern, London SE1 (020-7887 8008), until October 30.