Dennis Wheatley, gone the way of Edgar Wallace and Peter Cheyney, is unread now, yet for 40 years he was as famous and popular as anyone, with 20 million sales, standing in today's terms between Jeffrey Archer, another self-made author who wrote his way out of financial trouble, and Dan Brown, whose cod esotericism is close to a steal.

The pleasure of Baker's biography is in being reminded how daft Wheatley could be ("These birds are out to wreck the old firm of J Bull, Home, Dominions and Colonial"): voodoo Nazis and Satanists; astral projection; a power-mad dwarf smuggling agitators into Britain; a story in which a deep-sea explorer, a young duchess, a Russian count and a "dago" film star are hijacked at sea by a super-crook known as Oxford Kate.

By today's standards, Wheatley is a monument to political incorrectness, but, as Baker notes, the world was at least as daft as he was, with an acquaintance causing a diplomatic incident in Spain as a wartime agent fraternising with German agents while dressed as a woman, and the US government pouring millions into cold war clairvoyant experiments. Star of Ill-Omen (1952) worried about how Argentina's nuclear capabilities might affect Britain's ability to fight for the Falklands. Baker highlights this mind-bogglingly improbable potboiler as the essence of (lesser) Wheatley, in its combination of children's comic strip and adult derangement, like a cross between Dan Dare and, in a scene where insects show black and white films of great moments of human history, the weirdness of French proto-surrealist Raymond Roussel. Wheatley was never literary, but his world of jumbled pulp and esoteric was, in its own way, as distinctive as that of Borges.

He wrote for material success and to ingratiate himself with those he perceived to be his social betters. His father had been a Mayfair vintner who sold fine wines to the aristocracy and royalty of Europe, which gave the young Wheatley a world to aspire to.

A leg up the social ladder came with an officer's commission in the first world war, spent almost entirely away from the front, on courses or sick leave or in the brothels of Amiens. He fell in with a con man, named Tombe, later murdered, who brought him up to speed. ("You know Dennis this orgy business is all very well  in fact it is necessary to me.") Under Tombe's influence Wheatley's reading became racy  sexology and cultured erotica  a taste reflected in his library, which included a first edition of Ulysses ("Ravings of a lunatic possessed of extraordinary erudition").

He was close to fraud when the family business ran into trouble, but under the settling influence of his second wife, and with his libido in check after consulting a clairvoyant, he soon cracked the business of writing, hitting his stride with The Devil Rides Out (1934), which took the brilliant idea of grafting a literature of the occult on to the thriller. With, as Wyndham Lewis put it, so much of Europe having "gone Crime Club", Wheatley produced the perfect formula for the zeitgeist.

At the time he was quasi-fascist and in favour of appeasement, and among his fans was Hermann Goering, who urged him to come and meet the Nazi leaders (although Wheatley's Duke de Richelieu series was not published in Germany because one of its heroes was Jewish). He was recommended as possible gauleiter for north-west London in the event of a German invasion, but, as it turned out, spent the war writing secret, speculative papers for British intelligence. Later on, he contributed to a Foreign Office department for anti-Communist propaganda, producing a pulp novel for the Islamic market.

Like Maugham, Greene and Le Carré, Wheatley's career was influenced by his intelligence contacts, as was that of another writer whose debt to him is nearly always overlooked. Ian Fleming stripped down Wheatley's model to three essentials identified by Cyril Connolly as the winning formula for the Bond series: sex, snobbery and sadism. Wheatley was more a product of censorship than Fleming, but he still managed to appear dangerously well-informed to a gullible (and often young) readership keen for any hints of depravity, as in the masterfully suggestive, "Yet it is not only in Africa that such abominations are practised. A few years ago women were giving themselves up to hideous eroticism with a great carved ebony figure, during Satanic orgies held in a secret temple in Bayswater, London W2."

It was mostly bluff. In his smoking jacket, with his Hoyo de Monterrey cigars and well-stocked cellar, Wheatley was more suburban baronial than the English gent he pretended to be. He ended up being treated as a comic figure. In 1966 Giles Gordon, working for Wheatley's publisher before becoming a literary agent, sent out an unidentified Wheatley manuscript for a reader's report which, predictably, came back saying it was unfit for publication. The joke was on Gordon because, even then, Wheatley could shift 100,000 copies in 10 days. There was also an unlikely friendship with Anthony Powell, who had him down (not unkindly, given how he rated other writers) in the category of "relatively intelligent men who write more or less conscious drivel", but considered him sufficiently skilled to seek plotting advice from.

Chris Petit's novel The Passenger is published by Pocket Books.

In 1966, a young editor named Giles Gordon joined Hutchinson and was handed the latest Dennis Wheatley manuscript. Some streak of devilry made Gordon remove the title page and send it to the publishing house's most intolerant reader. "The book is terribly hackneyed," came the reply, to Gordon's delight. "Above all, [the author] cannot write. Regretfully decline."

At the time, Wheatley had 55 titles in print, he had sold more than 20 million books and, as Phil Baker, makes clear, he was not writing for the liberal likes of Gordon, whose objections were briskly overruled, but for a more traditionally minded readership. Wheatley's style and values are laid out in the opening pages of his bestselling work The Devil Rides Out, first published in 1934. The central character is the Duc de Richleau, whom we discover in the library of his West End flat, dressed in "a claret-coloured vicuna smoking suit", drinking "wonderful old brandy" and smoking one of the long Hoyos de Monterrey that were "his especial pride".

Discovering that "an age-old evil" is stirring in St John's Wood, he and Rex van Ryn, a "virile and powerful" young American, interrupt a satanic gathering. Among those present is a mandarin "whose slit eyes betrayed a cold, merciless nature", a "fat, oily-looking Babu in a salmon pink turban" and a "red-faced Teuton" with a hare lip. "A most unprepossessing lot," reflects de Richleau, as he defends himself against a mute Madagascan ("a bad black, if ever I saw one").

Wheatley was born in south London in 1897 and, following his expulsion from Dulwich College, was schooled on board HMS Worcester, a naval training ship. Commissioned into an artillery regiment, he had a goodish first world war, picking up women in Richmond Park with his battery commander, Major "Shitty Bill" Inglis, and, in France, wallpapering his billet in a ruined chateau so that it was "really tophole".

Demobilised, Wheatley struck up a friendship with a literate fraudster named Eric Gordon Tombe. Together, the pair lived the fast life, quaffing champagne in nightclubs and enjoying "hectic nights" with women.

Tombe, who would disappear in suspicious circumstances, was one of a number of colourful acquaintances whose exploits Wheatley would draw on when, in 1933, financial crisis led him to try his hand at fiction. Others included Montague Summers, a gay satanist who dressed as a priest and was sexually aroused "only by devout young Catholics"; a black magician named Rollo Ahmed, whose teeth had fallen out after he had "bungled a ritual and failed to master a demon"; and Maxwell Knight, the MI5 spymaster.

Knight was the inspiration for Ian Fleming's M, although, according to Baker, he was not the forceful figure of the James Bond books but a rabidly antisemitic closet queen. Wheatley, by contrast, despite his predilection for racist stereotypes, actively cultivated Jewish friends. Indeed, as Baker perceptively suggests, it may be that to Wheatley, "painfully aware that he was merely middle-class, Jewish company could offer a little holiday from the English class system".

As the years passed, and his books, with titles such as To the Devil a Daughter and They Used Dark Forces achieved huge sales, he grew to resemble one of his own characters, living the "suburban baronial" existence of the smoking-jacketed connoisseur until his death in 1977. At least as interested in politics as occultism, he seeded his novels with ultra-conservative ideals. To describe him as "a covert Platonic shaper of his people's consciousness" may be overstating the old boy's influence, but Baker's exhaustively researched biography is a terrific read.