Capital – a big name for a big, fat London novel – arrives in the bookshops with a fair wind behind it, looking like the book John Lanchester was born to write. Lanchester is probably still best known as a novelist for his funny and exhaustingly brilliant 1996 debut The Debt to Pleasure, the confessions of a homicidal foodie, cast in the form of a series of menus; his hero, Tarquin Winot, was a kind of Humbert Humbert reinvented in a broader comic key. But over the years Lanchester has made the surprising transition from Nabokovian warbler to all-seeing finance nerd. Since 2008 he has been writing excellent journalism about the banking crisis. His last book, Whoops!, was a primer on the subject for people who don\'t read the business pages. That isn\'t a dismissive description: on the contrary, it was so good largely because it explained things from first principles; his outsider\'s perspective meant that he described the issues clearly without the usual obscuring jargon, and reiterated the vital bits you\'d forgotten just as your mind began to boggle. Lanchester, who is the son of a banker, is extremely clever, and has a great talent for understanding the ways in which the world works. He predicted \"a financial disaster of global-systemic proportions\" in early 2008, long before most civilians, and his calls since then have been consistently, gloomily, accurate. All this, though, was merely a subject that he \"stumbled across\" while researching his latest fiction, described by his publishers as a \"post-crash state-of-the-nation novel\". In the prologue of Capital, a hooded figure is seen moving \"softly and slowly along an ordinary-looking street in south London\", filming the houses in which the large cast of main characters live or work: Roger Yount, an investment banker; Zbiegniew, a Polish builder; Matya, a Hungarian nanny; Freddy Kano, a young Senegalese professional footballer; the Kamals, a British Pakistani family who run the corner shop; Quentina, a Zimbabwean traffic warden; and Petunia, an elderly working-class woman – the last of the aborigines. The story begins just before Roger\'s bonus is revealed to him in December 2007; it ends in November 2008, with the world economy grinding to a halt. The opening of Capital is strikingly original. It seems that the real protagonists are not the people but the Victorian houses on Pepys Road. An omniscient narrator traces their history – built by a Cornish developer and Irish labourers in the late 19th century; first inhabited by clerks and other members of the \"aspiring not-too-well-off\". Next the Caribbean immigrants arrive, then the upper-middle classes with their open-plan kitchens and loft conversions and, finally, the bankers. The effect is a little like a Larkin poem (\"Many, many people had fallen in and out of love; a young girl had had her first kiss, an old man had exhaled his last breath, a solicitor on the way back from the Underground station after work had looked up at the sky, swept blue by the wind, and had a sudden sense of religious consolation …\") – but \"fluent in money\", as the book has it: \"For the first time in history, the people who lived on the street were … rich. The thing which made them rich was the very fact that they lived in Pepys Road.\" The early chapters are equally exciting, if more conventional. In an entertaining scene with a debt to The Bonfire of the Vanities, we see Roger totting up his outgoings – weekday nanny, weekend nanny, Lexus, old vicarage in Wiltshire, and so on – and concluding that \"if he didn\'t get his million-pound bonus this year he was at genuine risk of going broke\". In another, we\'re given a bracing tutorial on the parking tickets racket. Meanwhile, the inhabitants of Pepys Road start receiving postcards of their houses, bearing the menacing message: \"We Want What You Have\". At this point, the reader starts to think that this might be it: the novel of the great asset bubble, of London\'s disastrous love affair with funny money. But then, gradually, the disappointment sets in. There is a constant clamour for novelists to \"take on big contemporary questions\", as a recent Guardian opinion piece put it – to leave the Hampstead dinner parties and the safe historical settings behind, and write the Novel For Our Times. Actually, these books get written all the time, from Margaret Drabble\'s schematic portraits of the 1970s to Jonathan Coe\'s of the 1980s and Blake Morrison or Richard T Kelly\'s uneven sagas of the New Labour years, right up to the recent flood of credit crunch literature. The problem is that they\'re not usually very good, for quite straightforward reasons: creating and managing a large, varied and realistic cast of characters is very hard for an individual novelist to do, particularly now that society is so diverse. When working outside their own experience, novelists tend to fall back on recycled journalism, contrivance and cartoon. Even Tom Wolfe, with his prodigious eye for resonant detail and ear for spoken language, has a lot of trouble producing rounded characters. Of course good novels do paint memorable portraits of the societies in which they\'re set; but they tend to work much better when they\'re anchored in a distinctive individual sensibility or subculture – as books as varied as American Pastoral, Trainspotting, The Line of Beauty, Money or Disgrace show. The panoramic novel, by contrast, is extremely hard to do well. Lanchester\'s own career bears this out: his second book, Mr Phillips (2000), about a sacked accountant wandering around the capital, is wonderful – an inspired daydream about sex, statistics and the strangeness of ordinary London life. Whereas his mini-epic about Hong Kong, Fragrant Harbour (2002), is interesting and likeable but in some crucial respects lifeless. At any rate, the recent fashion for neo-Victorian condition-of-England novels in the vein of Little Dorrit or The Way We Live Now – featuring a range of emblematic intersecting lives and at least one City villain – looks unlikely to produce any great works of art. These books seem basically programmatic and unoriginal, fatally in hock to the news agenda. It\'s depressing that both Capital and Sebastian Faulks\'s effort, A Week in December, feature such a similar cast of characters: one rogue trader; one Asian male suspected of terrorism; one footballer. Lanchester has an illegal Zimbabwean immigrant, a human rights lawyer and an eastern European nanny; so does Amanda Craig in her London novel, Hearts and Minds. Half an hour\'s state-of-the-nation brainstorming, you feel, might have produced these dramatis personae. Capital is, like most of these books, seriously undertaken and solidly researched. Lanchester has a decent stab at describing what it must be like to run a corner shop, or to be detained under terrorism laws, or to leave a shack in Senegal to play alongside world-famous footballers. The banking sections are the most enjoyable; but fiction, as Lanchester himself has pointed out, has been beggared by reality in this area, and his story isn\'t a patch on, say, Michael Lewis or Andrew Ross Sorkin\'s non-fiction versions. The main problem is that his characters never really transcend their origins; they play whatever structural role is allotted to them, and do little more than that. At best, they have substance without vitality: as Virginia Woolf said of Arnold Bennett, he tries \"to hypnotize us into the belief that, because he has made a house, there must be a person living there\". At worst, they are caricatures. Roger\'s wife Arabella, for instance, is a lady who lunches – a spa-obsessed harpy who seems to be starring in her own slightly mirthless episode of Absolutely Fabulous. There\'s a creeping mood of aesthetic defeatism about the whole project. Lanchester\'s writing generally tends towards the bathetic: \"Actually it was a good sandwich,\" runs a typical sentence. But though this can be very effective, there\'s a drone about the prose here, with too much free indirect style in which the characters\' thoughts sound like the novelist\'s. And there\'s a lot of slightly lazy repetition: \"Parker, the boy she had been going out with ever since they kissed at a sixth-form dance on a hot June night back at sixth-form college.\" Plotwise, Lanchester has chosen not to have the staple set-piece of the panoramic novel: the climactic scene where all the disparate characters meet. This has the advantage of being true to London – where the paths of neighbours often never cross – but it leaves him with an episodic, soapy story whose meaning always threatens to become clear, but never quite does. All in all, Capital is a diverting read. It holds your attention all the way to its strangely inconsequential ending, and will probably sell well (Faulks\'s state-of-the-nationer took more than £4m). But if you want to read John Lanchester\'s great London novel, then read Mr Phillips.