Before there was Rangoon, there was the Shwedagon pagoda. The legend goes something like this. Twenty-five centuries ago, two merchant brothers named Tapussa and Bhallika met the Buddha, by chance, just days after his Enlightenment at Bodh Gaya, in northern India. They heard his teachings on how to respond to the generally unsatisfactory nature of human experience. They became amongst his first followers, presenting him with an offering of rice cakes and honey and asking for a token of their encounter. The Buddha gave them eight strands of hair from his head. The Burmese believe that Tapussa and Bhallika were from lower Burma and that on their return home they placed the hairs in a jewelled casket and enshrined the casket deep within what would become the Shwedagon pagoda.

The pagoda sits today in the middle of Rangoon, a sprawling city of five million people, on the only hill for miles around. It is an enormous golden structure nearly 400 feet high, shaped something like an upside-down funnel, with an octagonal base, a rounded dome, and then a long spire. The lower sections are covered in gold leaf, the upper sections in plates of solid gold. Altogether the Shwedagon is said to be enveloped in no less than sixty tons of gold. 'More than in all the vaults of the Bank of England', the Burmese used to say during the days of British rule. At the top the spire is encrusted with thousands of precious stones as well as diamonds totalling 2,000 carats. Archaeologists and historians are uncertain about the true age of the Shwedagon. It is known that the pagoda (in its current form) was built in the fifteenth century, but that it was built on top of far older structures, likely dating back at least to the early centuries AD. A treasure chamber doubtless exists within its innermost recesses.

The Shwedagon can be seen from almost anywhere in the city, reflecting the sun by day and floodlit at night. There is perhaps no other city in the world as dominated, physically and spiritually, by a religious site as Rangoon is by the Shwedagon. Rudyard Kipling, after a visit in 1889, described it as 'a golden mystery' and 'a beautiful winking wonder that blazed in the sun'. Thirty-three years later, Somerset Maugham, who had stopped briefly in Rangoon, remembered that the Shwedagon 'rose superb, glistening with its gold like a sudden hope in the dark night of the soul'.

It was dusk when I arrived at the Shwedagon. Statues of two giant griffins or chinthés, the winged half-man half-lion creatures of Burmese mythology, guarded the base of the immense staircase that led up to the main platform. The stairs were made of teak, dark and smooth, and as wide as a street, lined on each side with little stalls, each selling flowers or incense or religious icons. The sellers, like most stallholders in Burma, were women, some with their children playing nearby.

A high roof covered the stairs and so it was only at the very top that the Shwedagon suddenly came into view, surrounded by a complex of dozens of smaller pagodas, pavilions, rest-houses, and shrines of different shapes and sizes, all laid out in no particular manner, the result of centuries of gradual augmentation. Many of the pavilions housed statues of the Buddha, big ones and small ones, the pillars of these pavilions covered in gold leaf or in glass mosaics. It was like a little city from a fairy tale.

Buddhism is the religion of an estimated 85 per cent of all people in Burma (the rest are mainly Christians and Muslims) and all Burmese Buddhists are meant to try to visit the Shwedagon at least once in their lifetime. I can't guess the number of people who were there that evening, certainly in the hundreds, probably in the thousands. Nearly all were wearing a sarong-like longyi, patterned and tied differently for men and women, together with a shirt or blouse. Most were probably from Rangoon, people coming after work, but at least some were villagers from far away, their longyis in less fashionable patterns and a little more threadbare. There were Buddhist monks as well, in rust-coloured robes, and nuns in pale pink. Everyone was in their bare feet, as is traditional and required at all sacred sites. The air was scented with jasmine and marigold, and at some shrines people were lighting little rows of flickering candles. I went into one of the larger pavilions where there were already a few other people, including an old lady, her eyes tightly closed and her long grey hair tied up in a bun, kneeling on the floor, their hands clasped together in prayer, facing the large statue of the Buddha in front of them. I first knelt as well and then touched my head and hands to the ground.

For some, Buddhism is primarily a philosophy, a guide to being happy and knowing how best to deal with the vicissitudes of life. A visit to the Shwedagon is an opportunity to be reminded of the Buddha's teachings, perhaps meditate quietly, or simply try to calm your mind after a hectic and stressful day.

For most Burmese, however, the Shwedagon is also a magical place. The faithful believe that somewhere beneath the gilded stupa are not only the hair relics of the historical Buddha, Siddhartha Gautama, but the relics of past Buddhas as well, from aeons ago: the staff of Kakusandha, the water filter of Konagamana, and a piece of the robe of Kassapa, and that all these relics impart the Shwedagon with supernatural power.

The Shwedagon is also the haunt of weizzas or wizards, Tantric adepts who have achieved special abilities (like everlasting youth or invisibility). There is a small pagoda, towards the southwest, decorated with the figures of wizards and necromancers from times past, where some believe invisible beings come to meditate. There is also a pavilion dedicated to Izza Gawna, a wizard and alchemist of medieval times, and a 'Shrine of the Sun and Moon', whose two Buddha statues are said to grant the wishes of all who come to pay their respects.

The pagoda has also played its role in Burmese history. To the north is the 'Victory Ground', an open area where people come to pray for success of any kind, religious or secular. Traditionally, kings and generals came here before leaving for war. More recently, it has been the place to begin political protests. One of the first was in 1920, when students camped here at the start of an anti-colonial campaign. There's a column nearby in their memory, with their names written not only in Burmese and English but also in Russian, a sign of the high hopes the anti-colonialists then had for the recent Bolshevik Revolution. And protesters have gathered here ever since. In September 2007, thousands of Buddhist monks led peaceful marches against the ruling military junta. The demonstrations lasted for several days and on each day the monks started here at the 'Victory Ground'. But at least in this case their wishes went unfulfilled as riot police eventually closed in, sealing off the Shwedagon complex, and violently ending the demonstrations.

There may be wizards and the occasional protestors, but there are still very few foreign tourists. I saw one that evening, looking relaxed, in khakis and T-shirt, sitting cross-legged with his camera on the marble floor, watching the Burmese go by. I may be biased, but I would rank the Shwedagon as easily an equal of any of the other great sites I have seen, including the pyramids in Mexico, Angkor Wat in Cambodia, or the Taj Mahal. Ralph Fitch was the first Englishman ever to come to Burma, in 1584 as the captain of 'the talle shippe Tyger' (the ship mentioned, some say, by Shakespeare in Macbeth), and he said of the Shwedagon: 'It is, as I suppose, the fairest place that doe bee in all the Worlde.' From the beginning of 1962 through the 1980s, it was difficult to travel to Burma and tourism was discouraged. That has changed and it is today easy to visit. But in the place of old government restrictions there are now boycott campaigns from overseas, campaigns that have called on would-be tourists to stay away from Burma, so as not to contribute to the coffers of the ruling generals. The boycotts have been terrible for the country's nascent tourism industry, but have had the benefit of keeping back the hordes that will almost certainly one day come.

It was dark by the time I climbed back down the stairs and walked to the busy roundabout in front, to hail a taxi and drive to the 365 Café.

Edward was a Burmese businessman in his late fifties, a strongly built man with thinning salt and pepper hair, who had worked for several years in Singapore, as an engineer, before returning to Rangoon, his home town. He had a Burmese name as well, but like many of his class and generation had received an English name at school. The Burmese name he used for any official purpose and was the way he introduced himself to any new acquaintances. But to old friends (he was an old friend of my family's), he had remained 'Edward'.

He was waiting for me when I arrived, dressed in a dark Hawaiian shirt and a Burmese longyi. He had a broad, almost Polynesian, face, and looked tanned and healthy. We spoke in a mix of Burmese and English. 'Business is bad,' he said. 'Sometimes I think I made a big mistake coming back. I should have stayed in Singapore or gone to America when I had the opportunity. My brother's there, you know, in San Diego. He offered to find me a job, ages ago. My mistake.'

Edward had suggested the 365 Café. It was downtown, on the ground floor of the Thamada or 'President' hotel. It was decorated in a bright international style, with comfortable faux-leather chairs, and had a menu that offered a mix of sandwiches and Asian dishes. Big glass windows covered an entire wall, and through them you could see a small car park, with a couple of old Japanese cars and a big truck filled with crates of orangeade bottles. Beyond the parking lot was the street, and then a tall hedge, and finally a red-brick church, looking exactly like a church in a small English town.

'We have nothing like a proper business environment,' h...