Both Steiner and Rushdie work with somewhat blurred notions of what constitutes 'literature'. Sometimes this is syonymous with the novel, sometimes not. It may also account for why such a great novelist writes such astonishingly dreadful essays. Bill Buford takes a slightly different tack in this debate. Modernism is dead, he says.
Narrative is back.
Such an unoriginal point of view would not matter much, were Buford not the former editor of Granta, and now picking stories for as venerable a journal as the New Yorker. What he adds that is of interest is that the best storytelling is often now found in non fiction, or in 'hybrids' of fiction and non fiction. For example in a book like Michael Ryan's Secret Life. What I find extraordinary about these polemics is how narrowly conceived is the view of what constitutes 'literature', and what constitutes the literary quality of literature. For anything not a novel to qualify, it has to be a hybrid form, or at least pick up where the 19th century novel left off, with story telling.