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Hailed as 'the greatest theatre producer who ever lived' and the champion of all things beautiful, Serge Diaghilev transformed not only ballet but all the arts in the 20th century. Andrew O'Hagan welcomes the V&A's lavish celebration of his legacy

In Proust's rather newsy big novel, Mme Verdurin does not simply have her salon, she does not simply throw her party, her "Wednesdays": she puts them together "like a bird building its nest". She may be awful, but she has a captivating love of art, and she takes some trouble to make social life distinct for her small birds of paradise. In Scott Moncrieff's translation, Verdurin is "a sort of accredited representative in Paris of all foreign artists . . . an aged Fairy Godmother, grim but all-powerful, to the Russian dancers". In the last decade of his life, Proust would several times get dressed, apply his cologne, don his white gloves, and escape his clammy rooms on the Rue Hamelin to attend performances by the Ballets Russes. He went as if to greet the dawn. "This charming invasion," he wrote, "infected Paris, as we know, with a fever of curiosity less agonising, more purely aesthetic, but quite as intense perhaps as that aroused by the Dreyfus case."

Picasso was there with Jean Cocteau. Bakst was there with Benois or Stravinsky. Apollinaire was certainly there, making notes, with Satie, making comments. Braque came in. Coco Chanel whispered something to Matisse or Prokoviev or Max Reinhardt, and the person with the programme was Clive Bell, accompanying the "lovely but incredibly silly ladies" lampooned in letters by his sister-in-law Virginia Woolf. And there at the dead centre of this Risko cartoon of Modernity was the man who put it together, Serge Diaghilev, who is celebrated in a beautiful new show which has just opened at the V&A. Diaghilev was a tastemaker, a despot, a hustler and a genius: he not only "jump-started Western ballet", as the critic Joan Acocella has said, "but he staffed it". He gave Nijinsky and Pavlova to France and the world, but he also gave Marie Rambert to Great Britain, George Balanchine to America, Léonid Massine to Hollywood and Monte Carlo, and Stravinsky to himself. It might be time to say that the great avant-garde artist of the 20th century was not really an artist at all, but a producer.

Who but the world's greatest impresario could attract stage sets by Braque, costumes by Chanel and choreography by Massine, all to guide and enhance the faltering steps of a young Russian composer? Diaghilev was a businessman and a cosmopolitan who floated on ambiguity, a radical who thought only beauty could save the world. The V&A show demonstrates how the great 20th-century impulse, in the arts, was for international connection, and what was Diaghilev if not a global manager of wonder, a man who, out of his Russian beginnings, sought forms of wordless magic that could leap over borders and time zones and native conventions?

On 18 May 1922 he was looking rough at the edges. His shirts, though clean, were threadbare, and he had only £500 to his name, borrowed from the mother of Hilda Bewicke, one of his British dancers. It was the opening night of Le Renard at the Paris Opera, a ballet composed by Stravinsky and choreographed by the brilliant Nijinska, whose brother had once "paused in mid-air"â€" poor Nijinsky now insane and kept to an institution. That night, after the premiere, TS Eliot's friends Sydney and Violet Schiff threw a supper party at the Hotel Majestic to celebrate the Ballets Russes. Diaghilev, ever the man in charge of arrangements, took over the guest list. He was determined to get Picasso, Stravinsky, Joyce and Proust round one table, and he did so, in the upper room.

According to a wonderfully ripe account Picasso "exhibited his secret dandy soul by wearing a Catalan faixa above his eyes to upstage those dressed in white tie". (Les Demoiselles d'AvignonUlysses . Proust had been an admirer of Picasso's stage sets for Parade

You often hear it said that someone is like a person in a novel. But Diaghilev was like a person in many novels â€" Baron de Charlus by way of Prince Myshkin and Count Vronsky. He came to ballet late, after skirmishes with music (his compositions were dismissed by Rimsky-Korsakov), and art â€" curating, and editing a lavish fortnightly journal, The World of Art. He came to believe that ballet was the most magical of the arts, the place where sculpture and space, music and movement, painting, design, sex and death, came together. But for me the shadow of Proust's great ambition falls over him, the shadow of Joyce's, Henry James's, Nabokov's: to Diaghilev the ballet was like the novel, a place where the human spirit could find itself addressed in pattern, in rhythm and in thought; where delight abounded in a social unravelling and form evolved to become a revealing new dream of vitality. Walking through the V&A's show, you hear the wiry, kinetic frenzy of Stravinsky's Firebird , and you see flash after flash of genius â€" a shock of Matisse on the costumes for Le Chant du Rossignol; a certain inward turn of limbs in a photo of an acrobat from Parade; Nijinsky taking shape as the essence of roses, Leon Bakst 'S costumes Scheherazade ; Picasso's giant, sublime front-cloth of running women in Le Train Bleu â€" and you see that, whatever Diaghilev set out to do, he did in large measure, setting off not merely a fin-de-siècle ballet cult but an entire ferment in the culture of Europe. Several of his productions, not least The Rite of Spring, To stir up trouble, but he was a riot, and the work he produced an ongoing interruptive of the small pleasures and sedations art. You look at these works and these numbers are objects, and you're thinking: this story of a man in pursuit of a story of human ingenuity.

Born on 19 March 1872, Diaghilev grew up in Perm, at the foot of the Urals, and his childhood was one of horses and carriages and imperial winters. His best and latest biographer, Sjeng Scheijen, a Russian speaker with access to previously unpublished family letters and archives, locates an enigma in Diaghilev growing up in such a remote place, a man who was to become "the ruler of European taste during one of its finest periods of cultural blossoming â€" perhaps the greatest theatre producer who ever lived . . . a champion of beauty", emerging from a world bleaker than any in Chekhov (he would later invite Chekhov to be literary editor of his fortnightly journal). His father's money was made in vodka distilleries and lost when their monopoly ended, leaving the family bankrupt when Diaghilev was 18. The coming impresario showed his skill for organisation early, caring for his half-brothers from money left to him by his mother. He had a distant relation in Tchaikovsky, a muse in his father's new wife, his "second mother", and a lifelong family feeling about all who helped him escape into art. He attended St Petersburg in a vice of death-thoughts, and he visited Tolstoy, coming to the conclusion that "the dream and purpose of my life is to work in the field of art".

In constant contradiction with himself, Diaghilev was, as his biographer says, "trans-national and trans-sexual", a lover of the past â€" of Russian realism, formalism, nationalism â€" but with a special dispensation towards making it new. At first he wanted to exhibit the glories of European art in Russia, then he wanted to exhibit the glories of Russian art in Europe, and he did both, though the latter project would be the one that would make him famous. He and his friends, the young painters and dancers, resemble some of those in Nabokov's first novel Mary , teetering on the edges of revolution and self-invention. Even before be brought the Ballets Russes to the west, he was collecting sensibilities that might serve his project. In Paris in May 1898, he went to see Oscar Wilde with the intention of buying some of Aubrey Beardsley's erotic illustrations. "There is a young Russian here" Wilde wrote, "who is a great amateur of Aubrey's art, who would love to have one. He is a great collector, and rich. So you might send him a copy and name a price . . . His name is Serge de Diaghilew." The young Russian said to his friends that people stood on chairs as Wilde and he walked arm and arm down the Boulevard.

The self-myth-making had already begun. In this great anniversary year of the Ballets Russes, what we find when we look at Diaghilev is a great and sometimes monstrous example of the self-inventor as international guru of art. Behind him stood his mentor Tolstoy, his admirer Oscar Wilde; in front of him stood his young friend Picasso, his protégés Stravinsky, Nijinsky, Debussy and Prokoviev. And ahead of them: Balanchine and Nureyev, Nabokov and Andy Warhol, Schoenberg and Louise Bourgeois. Each was head of a school that celebrated its own discrimination. Each chose to represent the universal reach of tradition and the individual talent. Diaghilev was a new kind of artist: he was an operator as much as a beauty-maker, as savage as he was sublime. The Ballets Russes put ambiguity on a reconstituted map, and though there would always be something of the green carnation about these artists, as ballet professionals they trumped feyness with athleticism and married androgyny to paganism, an achievement that we now see lighting the way for every other aspect of popular culture.

High culture isn't what it used to be. Ballet is fighting for its life, poetry is a blood sport, and the avant garde is a joke in the Daily Mail, so what today, other than a debt of gratitude for how it revivified the arts in the 20th century, do we owe to the beautifully crazy world of the Ballets Russes? There are some small answers: the persistence of atonality and robust sexuality in orchestral music; a connection between design and movement that continues to inform innovation in the theatre; the presence of liturgical ritual, gesture and androgyny in rock and roll. But the bigger answer is to do with ballet itself as an art form, an area of endeavour going through a bad patch for my generation, but decidedly sacred, to some of us, as a hall of mirrors to the human imagination. Diaghilev made dance part of the modern mindset, and he continues to make it so, wherever the investment is able to be made. I can't see a ballet, or a fashion show, or an art installation, or a frieze, without thinking of Diaghilev and the connections he made possible. Stravinsky, in old age, credited the Ballets Russes with "the development of choreographic art in the entire world". When Bonnard was asked about the influence of the Ballets Russes, he said, "But they influence everyone."

Diaghilev's world, of course, was full of other changes, and after 1917 he would never be allowed home. His base of operations became Monte Carlo. You sometimes wonder how all these scarf-fluttering, slipperette-wearing individuals avoided the agonies of the first world war and the Russian revolution. The answer might be that they responded to public tumult at the level of style, which is pretty much all you can ask of artists anyhow. They represented their own vanguard and their own campaign against barbarity, doing it by leaps and with dressmakers' scissors, which doesn't make them war heroes but makes them what they are. Diaghilev, in accordance with decadent tradition, drank champagne during the first world war, and made do with his own plots and incendiaries. But while the squeals went up from the orchestra pit and the bourgeoisie chewed their fists, his own brother Valentin was taken to the Solovki prison camp, where eventually he was murdered. Stalin removed Valentin's son in 1937 to the mines of Solinsk as a designated enemy of the people.

Culture was threatening in those days. The more talented took risks, and sometimes others paid the price, but Diaghilev himself never stopped believing the Ballets Russes could fulfil a promise he once made to his mother from Venice. "All that is real," he wrote, "is in constant contact with magic and mystery." He took it for granted that political power alone could not answer life's mysteries, though he himself was mad on power. That was his personal contradiction, but what he made, and what he left, was a charming vision of otherness, a compendium of how to live and dream of perfection.

Diaghilev and the Golden Age of the Ballets Russes, 1909-1929, Victoria & Albert Museum, London SW7 until 9 January 2011. 'Extra' members get a 20% discount on full-price tickets. guardian.co.uk/extra

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