When a writer begins his manifesto with "Once upon a time...", you can tell he's not all serious. Iyer's manifesto, if it weren't obvious from its title ("Nude in Your Hot Tub, Facing the Abyss"), is a joke. It's a great, long joke; I like the line about the "bones of animals that had ceased to exist."
But it's not a joke about literature. In fact, it's not really about "literature" at all. Take a look again at Iyer's list of authors: "Kafka, Lautreamont, Bataille, Duras." And later in the essay: "Diderot, Rimbaud, Walser, Gogol, Hamsun, Bataille and most of all Kafka." Forget Diderot, he's a kind of red herring, as is Gogol to an extent. Look at the others. Who are they? They're the High Modernists, the pantheon of literary modernism. There's a reason you don't see Dante, Shakespeare, Tolstoy, and the like: they're not modern.
Iyer's not talking about "literature" in his send-up of the cult of the author: he's talking about a very particular type of literature that began to develop in the 19th century and had its full flowering at the beginning of the 20th. It's an antisocial literature: it's books that are either ignored or banned, authors that live in exile or spend time in jail. It's Bataille and Duras, whose works resemble pornography. It's Blanchot, who wrote about both of those authors, whom Iyer has written two books about. For some it's the greatest work of its time, or of all time. It's modernism.
But another thing about the manifesto: it's not really a joke, or not a normal kind of joke. That is, if you laugh at it, "you find yourself laughing in spite of yourself, laughing helplessly at yourself, laughing to the verge of tears" (as it says at first section's end). In laughing you're forced to remember just what's been lost: the greatest literature of its time, and perhaps the last great literature. Look at the word "modern" in "modernism": meaning, "of, relating, or characteristic of the present...contemporary" (Merriam-Webster). When you give up modernism you also give up the innovation it represented: its desperate, halting attempt to come to terms with a strange new world. Lose modernism and you lose the present.
Then Iyer gives three great close readings of three great contemporary and near-contemporary (Bernhard: 1931-1989; Bolano: 1953-2003) authors. I don't want to dismiss the readings or the authors, but I have to point out something strange. It emerges when he talkes about Vila-Matas and Kafka:
"The structures of religion had collapsed for Kafka, leaving him in the realm of allegory, but for Vila-Matas, even the structures of allegory have collapsed, even the structure of narrative itself have fallen into ruin."
Any student of literary modernism knows how bullshit this is, and it's weird that Iyer tries to pull it off. None of the modernists trusted narrative, Kafka least of all: there's a reason he never finished published his novels (which are in a sense anti-novels), the same reason that his short stories are full of "dream-like" twists and punctures of reality. It's the same distrust of form that leads Faulkner to abandon normal narrative form in his masterpieces, opting for a chaos of retellings; it's the same distrust that leads Mann to his all-engulfing irony, Rimbaud to a chaos of images (Illuminations), Beckett to "minimalism." In seeing the ruin of narrative, Vila-Matas is making himself a good modernist.
In fact, the distrust of literature forms a good part (maybe the main part) of the literary modernism Iyer mourns. To build something new (to be "modern") you have to destroy what was there before. Benjamin writes (in "The Destructive Character"): "Where others encounter walls or mountains, there, too, he sees a way. But because he sees a way everywhere, he has to clear things from it everywhere." The modernists knew literature and doubted it. Bataille's obscenities, Kafka's black humor, Beckett's void were all ways of being sub-literary.
Near the end Iyer says, "Don’t be generous and don’t be kind. Ridicule yourself and what you do." But this brutality, this abnegation, is the first impulse of modernism. All that has gone before is suspect. To distrust modernism is, for Iyer, the greatest way to keep living it.