P. Diddy: Who's fabulous now?

He compares himself to Jay Gatsby and personifies the excesses of New York's hip-hop scene. But with the city now in mourning, has the world of 'P.Diddy' Combs had its day?

The glory days of ghetto fabulous are over. The hip hop trend proposed a view of New York life as an endless cavalcade of good times, nubile girls and vintage champagne. Its chief ringleader was rapper and multi-millionaire record company mogul Sean "P.Diddy" Combs who coined the term with a vivid description of his position at the nexus of both high society and street life. "I'm the one driving around in the Rolls Royce with his hat turned, goin' down Fifth Avenue with the system booming in the back. Walkin' into Gucci, shutting down the store, buying everything at the mutherfuckin' same time, driving up to Harlem and givin' out $100 bills to homeless people. No other nigger out there can say they're ghetto fabulous; I'm ghetto fabulous!"

But after the devastating events of 11 September, with New York in mourning and recession biting, such ostentation now looks spectacularly tasteless. Hip hop, often called the CNN of black people, has highly acute social receptors and before long there will be rappers aiming to put New York's hurt and loss on record. But quite where that leaves Combs, rap's wealthiest, most extravagant high-roller is unclear. It's too late for him to change the tracks on his latest album, The Saga Continues..., released in two weeks, to re-shoot his scenes in the film Made, or to erase the flashy photos of himself gracing the current covers of Vogue and Details. As those pictures make clear, image is everything to Combs. Indeed, despite a string of hits in Britain, his career as a recording artist is easily eclipsed by his extravagant lifestyle. Earlier this month, the 31-year-old was listed at number 22 in Fortune's list of the 40 richest Americans under 40. He is worth $231m and seems determined to enjoy his riches. Personal assets include a house on Park Avenue, a mansion in the Hamptons and designated summer and winter Bentleys. He also has a penchant for ankle-length white fur coats, diamond jewellery and Cristal champagne. Combs could even boast of the ultimate celebrity accessory, another A-list star on his arm, until the break-up of his relationship with Jennifer Lopez in February. With or without her though, he likes to keep famous company. For his 29th birthday he threw a $600,000 party in New York at which guests included Donald Trump, Kevin Costner, Muhammad Ali and the Duchess of York. Combs is a "maven", a consummate social connector, before whom all barriers of race and class dissolve.

Until he changed his name recently to P.Diddy, Combs performed under the title of Puff Daddy. But he has also tried out other sobriquet ranging from the opportunistic ("the black Sinatra") to the overweening ("the world's greatest entertainer"). In private though, he imagines himself heir to another self-made American also known to throw a good party, Jay Gatsby. ("Have I read The Great Gatsby? I am the Great Gatsby!") It doesn't seem to bother Combs that Gatsby's life ended in shattered dreams, his well-heeled friends exposed as fickle and insincere. But then, while Gatsby found it ultimately impossible to escape his humble origins, Combs has no such concerns. Far from hiding his roots he does the opposite, insisting upon, and even exaggerating, his connection to the streets of New York in order to offer himself as a brand name for black urban culture. Fitzgerald, the laureate of the jazz age, would have found it difficult to countenance that blackness could be a social asset. But this is the hip hop age. And Sean Combs' millions are based on the enormous influence that black culture now wields across America and the rest of the world.

There are scores of black novelists, film-makers, artists, playwrights and poets, so it's not true to say that hip hop is the be all and end all of black culture. But no other art form comes close to matching its significance as a means for young black people to define themselves and for white society to keep a fascinated eye on them as they do so. Indeed, while almost all rappers are black the majority of their fans are not. About 70 per cent of hip hop albums on sale in America are bought by white consumers. Last year, those fans helped pushed sales of rap records to around $1.8bn, surpassing country music to become the second most popular genre in America after rock. Rather than black culture, the true comparison for hip hop is with youth culture. As the New Yorker recently noted: "Like rock and roll in the 1960s, hip hop is both a movement and a marketing ploy, and the word is used to describe almost anything that's supposed to appeal to young people."

The growth of the genre has turned rappers into movie stars, celebrity endorsees for multi-nationals like Pepsi and The Gap and increasingly, into businessmen. Witnessing the corporate profits being made off them, they now they want to convert their credibility as street icons into self-owned record labels, film production houses and clothing companies.

It's in this entrepreneurial milieu that Puffy (as he's still informally known) thrives. Raised in suburban New York, he blazed an early trail in the music business which led to the formation of his own company, Bad Boy Entertainment, at the age of 24, in a joint ownership deal with Arista Records, part of the giant Bertelsman Music Group. Combs proved to be an acute mediator between the mainstream and the underground, transforming unprepossessing material like the 315lb hardcore rapper Christopher "Notorious B.I.G." Wallace into a chart-topping sex symbol. By 1997, the label was dominating the Billboard charts with a turnover of over $100 million. Indeed it was only with the fatal shooting of Wallace, the label's most bankable asset, that Combs felt the necessity to release a record of his own. An artist who was already a CEO in real life, Puffy has become the embodiment of corporate rap, merging art, commerce and hype into a relentless drive for profits. Sean John, the clothing label he launched two years ago, now earns $100m, while his soul food restaurant, Justin's, has branches in Harlem and Atlanta. Combs makes his acting debut this year as a mobster in Jon (Swingers) Favreau's Made and plans to expand into feature film production and directing.

In Puffy's wake most of hip hop's biggest acts have remodelled themselves as moguls. Multi-million-selling New York star Jay-Z has a clothes label, plus a record and film company tellingly named Roc-A-Fella. Southern rapper Master P made the cover of Fortune in 1999, after his diversification into film production, fashion and sports management earned him an estimated $250 million. Meanwhile, things are moving the other way too. This month FUBU, a $350m clothing label favoured by rap fans, announced its transformation into an entertainment company, with film, TV and music divisions aimed at the hip hop market. Outkast, Snoop Dogg, Busta Rhymes ... few rappers are likely to enjoy the same impact as Combs but they're determined to try. Even for those artists who've never seen the inside of a boardroom, looking like a big shot still matters. Last year, Newsweek ran a cover story that announced, "Welcome to the bling-bling generation", a reference to the ghetto fabulous-inspired fad in hip hop for Cartier watches, platinum rings and specifically, high-carat diamond jewellery that shines or "bling-blings" in the light.

The viability of corporate rap is based on the assumption that its stars continue to "keep it real" as icons of rebellion. That's what teenage white fans think they're getting when they buy up lurid tales of drug deals and drive-by-shootings. For black followers hip hop's a validation of identity and a marker of where to go next, style-wise. At Britain's R&B and two-step clubs like Twice as Nice, you can see rap's current love affair with ghetto fabulous status symbols mirrored in the popularity of labels like Versace, D&G and Moschino. The same is true further afield. When I visited His Majesty's, the most popular nightclub in Accra, Ghana, this year, I was struck by the procession of Mercedes, BMWs and SUVs pulling up outside, stereos blasting hip hop into the night air, disgorging glamorous young couples in Tommy Hilfiger and Ralph Lauren.

All of this is somewhat ironic given that hip hop has less to do with keeping it real than ever before. The triumph of corporate rap is that it presents an easily consumable image of black street life which leaves fans happy and rappers free to go home and check on how their stocks are performing. The only problem is when reality intrudes. Puffy, for instance, has faced a string of legal cases throughout his career. Earlier this year, he stood trial for weapons and bribery charges in connection with a night-club shooting and faced 25 years in jail before being cleared. His high-wire act between Harlem and the Hamptons is an increasingly precarious one. The more he's photographed preening at society soirees the lower his credibility falls on the streets of New York. The night-club incident started, for example, when a stranger calling himself Scar threw a fistful of $100 bills in Combs face – a gesture of contempt aimed at a dilettante. The truth, notes hip hop writer Michael Eric Dyson, "is you can't run a multi-million dollar corporation and be a thug at the same time."

Combs has been New York's great entertainer for the past few years. Watching him go from strength to strength it seemed the party would never end. That's what he believed too if the title of his new album, The Saga Continues..., is anything to go by. But with the city so shattered it will be up to listeners to judge whether Puffy, and his homage to the Cristal and Cartier high life, still feels "real".

'The Saga Continues...' (P.Diddy/Arista) is released on 8 October