Interesting article in the UK's Prospect Magazine which more or less gives Don Quixote full credit for inventing not only the modern novel but also the modern world.

The day Quixote and Sancho rode out from their unnamed village, a fictional blueprint came to life. Don Quixote is our prototypical text, the first story to emerge out of a self-awareness of its own fictional form, to take as its theme the gap between appearance and reality; to be, in our terms, modern. It is to the modern novel what Sigmund Freud is to psychoanalysis.
...
Fuentes illuminates well Don Quixote's suffering—that he must choose between the drama of make-believe and the mean necessities of reality—but the novel additionally lights the way of readers yet unborn through the knight's dual lesson of the choice he must make and the choice the reader must make about his fictional necessity (or not).

Believe in me! My feats are true, the windmills are giants, the herds of sheep are armies, the inns are castles and there is in the world no lady more beautiful than the empress of la Mancha, the unrivalled Dulcinea del Toboso! Believe in me.

Reality, as Fuentes writes, "may laugh or weep on hearing such words." But reality also feels itself outmanoeuvred, outgunned by their appeal. After hearing them, we as readers can forever understand that there is more than one objective reality.

The comparison to Freud strikes me as sort of a backhanded compliment, but the rest is certainly true.

There is a view in literary-critical circles that Don Quixote's signal accomplishment was the victorious elevation of the novel over the romance. The deluded knight's attack on Master Pedro's puppet theatre for example, is, according to Bloom, "a parable of the triumph of Cervantes over the picaresque and of the triumph of the novel over the romance."

Yet this seems a limited reading of the novel. It is as unfair to say that the Quixote is merely a "critical parody" of the romance as it is to say that its eponymous hero is merely mad. The forms of Cervantes's moral thought are pointed to in his humour: the author is simultaneously satirising Quixote's belief in chivalry and commemorating it through the comic forms of his forgiveness...In the Quixote [romance] is the engine both of Quixote's folly and of our deepening sympathy—a reader's way of recognising a hero's predicament as latently his or her own. Through the innumerable possible readings of the Quixote, we can perhaps identify a core of distinct principles: that there is no reality without folly, and no underlying perception of reality without romance, of one kind or another, to draw out human curiosity.

This is certainly true, too.

One last thing. It's a minor part of the article, but it bears considering:

But Cervantes could not know that in 2002, in a poll organised by the Norwegian Nobel Institute, 100 writers worldwide would vote Don Quixote the "best and most central work" in literature, eclipsing the plays of Shakespeare, Dostoevsky's novels and Homer's epics.

In Don Quixote vs. Hamlet: The Brawl for It All, I do think it's Don Quixote by a nose. The Odyssey potentially edges out Hamlet, too, or so I feel right now. Too close to call, certainly.

[also via A&L Daily]