Moments that made the year: Even through our tears we were surprised by what we saw; we didn't realise how much we had changed

The death of Diana

While there are those who argue that we all went mad for a week in September, that the death of a rather silly, self-obsessed women was blown out of all proportion, that her passing meant no more or less than the death of any other individual, that nothing has really changed, the event that will keep 1997 in our memories for years to come was, of course, the death of Diana, Princess of Wales.

No one could have predicted the reaction: the Ballardian nature of her demise, the huge display of public grief, the sense of national reassessment that was in the atmosphere, the spectacle of a Labour leader trying to drag the monarchy into the 20th century. Instead, we look on in amazement as we behaved as if we were living in another country. And we were. It was just that no one realised that this new country was ours, that it has been for some time and what felt like new territory for some was already home for many others.

Three months later we are asking if it meant anything at all. I said at the time that to look for a direct political correlate to arise from the shock and grief surrounding Diana's death was always a mistake. Yes, there were moments of anti-monarchy feeling akin to, but not the same thing as, republicanism. There was revulsion expressed for the stuffiness of the royals, there was a feeling of a new beginning, an optimism about New Labour, a relief at the ending of Tory rule, a building mistrust of all institutions. All these things were in the air but not in a consciously politicised way.

Much of what was expressed was expressed in the first person. That was what was admired about Diana. She validated personal experience; she re- wrote the script to suit herself. Even though she was a star, somehow not of this world, what you heard repeated was that she was a real person, she spoke from the heart, she was authentic.

Her modernity, in contrast to the rest of the royals, embodied a cultural shift, a fresh way of doing things, that doesn't fit into neat political categories. These repercussions are still being felt throughout society. Diana was not a feminist but she was a product of the raising of female expectations brought about by feminism. She understood instinctively that the personal was political, for she lived a life in which she was expected to suppress her personal feeling because of public duty.

The scenes of mourning that filled our papers and screens in September were unlike anything we had seen before, yet of course there were dissenters, who thought it was all too much fuss about nothing. While I am prepared to accept that their feelings were perfectly genuine, they do not seem to accept that the feelings of those at Kensington Palace or in the Mall were equally genuine.

It was easier to dismiss this collective grief as hysteria, as fuelled by the media, as essentially empty. Some of this was to do with the equation of any kind of massing together of people as innately fascist. This fear of crowds was instilled during the darkest of the Thatcher years. Where some saw a floral revolution, Ian Jack reports the phrase "floral fascism" in "Those who Felt Differently", in Granta.

Yet in looking back at the remarks of so many intellectuals, I am struck by their triteness in comparison with the self-awareness and thoughtfulness of the "ordinary people" I spoke to at the time. One by one, from Gore Vidal downwards, these great men told us the crowds were not really grieving for Diana but for themselves, as if we didn't know that, as if grief did not always contain this element, as if it is not possible to feel a connection with someone you didn't know. No one said this when we cried for the poor bairns of Dunblane.

In contrast, members of the public told me that they were grieving for what had happened to this country in the last 18 years, that when someone dies you re-evaluate your own life, your own priorities and that's what they felt we should all be doing as a nation. They told me that it was rare to witness real goodness in a public figure, that they themselves were surprised about how they felt and, most memorably, I can still hear a Rasta guy saying: "She's like a magnet, man. Even though she's dead she's still a magnet - pulling people towards her."

I saw dignity and though I saw tears being shed and shed my own, people were not overwhelmed by their feelings but quietly in control of them. We had not suddenly become American or European. We had simply recognised that Britishness need not be stuck in the 19th century.

Since her death, some have railed against the new "emotional correctness", where feelings must be shown at all times. Indeed, the behaviour of some of Louise Woodward's supporters could not have been more inappropriate and undignified. Emotional correctness, though, like political correctness, is a term only used by those who prefer the repressive status quo.

Popular culture has for years been moving in the direction of the subjective, the confessional, the unashamedly emotional. Official public culture has yet to catch up with these changes. Earl Spencer's speech struck this note and I will always remember the mutinous ripple of applause that spread from outside the cathedral to the inside.

Cynics argue that while we became touchy-feely for a week or so, that much-heralded new sensitivity has not materialised. Indeed, when the Government cuts benefits to the poorest women and children, it seems a joke.

Diana's death, though, coming after the Labour victory, the hype of Cool Britannia, the talk of re-branding Britain, gave much rise to much discussion of the New Britain, as though such an identity could arise fully formed and uncontested.

We saw in Diana a woman seeking to find herself, to somehow speak a more intimate and personal language within the discourse of public life. We saw a woman trying to reshape a role for herself when she has been used for little more than breeding in captivity. And we saw in the midst of the mourning for her a desire to do things differently.

We wanted tradition thrown over in the name of honest emotion. Now at least we know that the Queen is capable of grieving in public: she shed a tear at the loss of her yacht, something she did not do publicly for the loss of her daughter-in-law.

The royals have learnt to accept what they could not accept when Diana was alive, that they have to change. Tony Blair has stepped in to advise them, which is worrying, given his pledges on constitutional reform.

Earl Spencer has been shown to be a complete bastard, though I don't see how that makes his speech any less powerful. The rest of us have gone back to normal. Or not quite, for something has changed.

Diana's death meant that just for a while we saw ourselves not as we were told we were, not as we used to be, but as we are now.

Even through our tears we were surprised by what we saw; we didn't realise how much we had changed. But we had. Why it took the death of a confused and over-privileged woman to show this to each other I don't know. All I do know is that while we have lost her, I hope that we do not lose the values of love and compassion that she was seen to have represented and that for an extraordinary week we were not ashamed to talk openly about in public as well as in private.

The event that defined the year was really one in which, in an unprecedented way, we were seeking to define ourselves.