LONDON VAUXHALL DEALERS

The countdown clock that once measured in years is now down to hours, minutes and seconds. More than seven years since that hesitant, fumbling moment when Jacques Rogge of the IOC struggled to open the envelope containing the single word "London", the day is upon us. On Friday night, in a stadium built in an area once deemed an urban wasteland, the flame that has journeyed from Athens to every corner of these islands will light the fire that launches the London Olympics of 2012.

At stake will be the ambitions of more than 10,000 athletes who have trained and toiled for this fortnight, who doubtless see those five interlinked rings in their sleep, whose dreams are coloured gold. Watching them will be hundreds of thousands, and hundreds of millions more via television, drawn by that perennial human compulsion to see what our species is capable of at its best: to see how strong, how fast, how beautiful we can be.

But also at stake is a contest that involves the people of Britain especially. For these Olympic weeks will offer answers to a clutch of questions that have nagged at us since the last time London hosted the Games in 1948. What exactly is our place in the world? How do we compare to other countries and to the country we used to be? What kind of nation are we anyway?

There's nothing unique in that. Major sporting events often present their hosts with an occasion to reassess themselves and be reassessed by others. In 2008 China confirmed its seat at the global top table with the Beijing Olympics. The success of Sydney in 2000 told Australians they were as capable as any other first world nation and it was time to banish the cultural cringe. The 1984 Los Angeles Games came to represent Ronald Reagan's "Morning in America". It can work the other way too. In 2010, India's confidence took a blow when Delhi's hosting of the Commonwealth Games came in for widespread criticism. As Tony Travers, scholar of cities and especially the capital at the London School of Economics, puts it, "They're like airlines used to be: a test of national pride and capacity to deliver." And the Olympics is the big one. "It's the UN general assembly, Davos, the World Cup and the world's biggest convention of journalists all rolled into one."

Even up to the last minute, in the final days of preparation, the question of whether Britain can actually pull this off has seemed in doubt. A wearily familiar narrative is already in place: the Britain of the Daily Mail and Crap Towns, the Britain where nothing works any more. If it wasn't the failure of G4S to provide security staff, it was the threat by the PCS to call border guards out on strike. One an incompetent company made rich by privatisation, the other a militant-led trade union, the two seemed to spell out twin aspects of our troubled political past: Thatcherism and the winter of discontent uniting to ruin the Olympics.

Add in a ticketing system that left millions disappointed along with fears of a creaking transport network and a costly stadium that, so far, has no planned afterlife, and it seems that disaster looms. Commentators on the left and right have united in rage at the rocket launchers on residential roofs, the Zil lanes for IOC bigwigs, the gagging reflex of Olympic corporate sponsors, censoring anything they declare an infringement of their monopoly and, of course, the £9bn budget at a time of austerity. Until a few days ago, when summer seemed to have passed this country by, the smart money said London 2012 would be a literal and metaphorical washout, rubbish or wasteful or both. The cynics' eye view has been articulated perfectly by the BBC's brilliant Twenty Twelve series, from whose scripts Wednesday's confusion of South and North Korean flags at a women's football match in Glasgow could have been lifted directly.

All of this angst has not gone unnoticed abroad. The New York Times opened a report from London thus: "While the world's athletes limber up in the Olympic Park, Londoners are practising some of their own favourite sports: complaining, expecting the worst and cursing the authorities." In the words of Prof Stefan Szymanski, who specialises in sports management at the University of Michigan, "Perhaps Britain doesn't believe it can do this."

And yet, at the same time, a counter-narrative has been developing. Its most eloquent expression has been the 70-day torch relay, which has outrun all expectations. Drawing big, enthusiastic crowds across the entire country, it has all but erased what had been one of the chief concerns of 2012: that it would be seen as a London-only event, of interest only to the capital. Instead, the sight of a simple flame passing hand to hand, from jogging young mother to local youth worker to elderly civic volunteer, seems to have touched Britons quite deeply. In Hackney last weekend, a borough which a year ago was on the brink of vicious riots, people filled the streets not to stone policemen but to high-five them.

The sense of expectation is building, too. A staple of London smalltalk has become, "Have you got any tickets?" And the response to the appeal for volunteers has been remarkable. Their training manual forbids them from talking to the press, but I learned this week of the 72-year-old man now staying with his daughter in London so that he can work at the volleyball venue, doing 11 10-hour days in the coming two weeks, starting work each morning at six. He plans to get up at 4.30am every working day and last Friday woke at 4am in order to do a test run by Tube to the venue – promptly walking back again to calculate how long it would take if he had to travel on foot.

A much younger fellow volunteer has taken a holiday from her job in Scotland and hired a caravan for two weeks, pitching it on the outskirts of London, so that she can do her bit. They're not complaining. On the contrary, they say they're excited to be part of a once in a lifetime event.

There are, then, two conflicting impulses alive in the British breast. Perhaps we are always like this when faced with such a collective experience. Britons certainly divided over that strange, heady Diana week in 1997 and again over how to mark the millennium. In the case of the 2012 Olympics, ambivalence was encoded into its DNA from the very start.

For many Londoners the memory of that day of celebration, the cheering and whooping of 6 July 2005 when the capital's victory over Paris, Madrid, New York and Moscow was announced, is inseparable from what immediately followed: the bombings of 7 July. The timing was especially cruel, suggesting that London was both blessed and cursed, that it might win but that it would not be allowed to savour its triumph for long. Perhaps some of that mixed sentiment lingers even now.

Indeed, the combined memories will be present in human form, in the person of Martine Wright, who lost both her legs on the Circle Line train bombed outside Aldgate station on 7/7. She later took up sitting volleyball, in which sport she will compete in the Paralympic Games as a member of Team GB.

So there is nothing uncomplicated about the event . Even now, there is a sense that it could go either way, that we might pass this mammoth test or flunk it. US presidential candidate Mitt Romney, in London this week to raise funds and not, he insisted, to see the horse he owns compete in the dressage event – what his opponents gleefully call the "dancing horse contest" – said as much when he admitted he had found the G4S and PCS stories "disconcerting." And he may have been right when he wondered aloud about Britons' enthusiasm: "Do they come together and celebrate the Olympic moment? That's something which we only find out once the Games actually begin."

In this, Friday night's opening ceremony will be crucial. The choice of Danny Boyle as ringmaster suggests a possible resolution of the great British dilemma. For the show Boyle is likely to produce will surely understand something important about this nation: that the whingeing and complaining are not a repudiation of national identity, but a part of it. Sunder Katwala, founder of the thinktank British Future and a cheerful enthusiast for the Games, is not worried by the naysayers' grumbling: "Their cynicism is a performative act of Britishness," he says. "They're part of the chorus."

Boyle, he reckons, will get that. There will be no Beijing-style massed, precision choreography: "Opening ceremonies organised by the politburo deserve a raspberry," Katwala says. We remain the people George Orwell described in the essay Your England. "Why is the goose-step not used in England?" Orwell asked. "It is not used because the people in the street would laugh." Boyle knows that there can be no North Korean pageantry, nor any of the unironic, chest-puffing patriotism of LA 1984. No one in Britain says what Americans say regularly – "Is this a great country or what?" – not without an arched eyebrow anyway. So Boyle's ceremony will surely incorporate humour, self-deprecation and some of that nonconformist spirit that is continuously British.

It is a big task for one evening, even one that cost £27m, but it will be part of a process under way since the end of the second world war, as we look for our place in the world.

When London first hosted the Games in 1908, it was clear: Britain was a mighty empire that saw its natural place as bestriding the global stage, setting the sporting rules the rest of the world would follow for nearly a century and topping the medals table while we were at it. In 1948 it was a battered and exhausted London that played host, knowing that the days of imperial glory were gone for ever. What followed were decades of uncertainty over where the country was meant to go next. The result, says Szymanski, is that "we can be a bit like a manic depressive, with mood swings. Sometimes we think we're the best in the world, sometimes the worst. But we need to be realistic: we're neither."

London 2012 is predicated on an answer to that stubborn question about where we belong. It's worth going back to the bid the capital made seven years ago, especially to the three-minute video which reportedly won over wavering IOC hearts in Singapore. It hardly featured London at all. Instead it showed children in a South African township and a Latin American street market, in China and Russia, dreaming of heading to London to win Olympic gold.

This, says sportswriter Mihir Bose, who was there that day, was a radical departure from the "arrogance" not only of the French bid – whose video was full of images of the magnificence of Paris – but of past British approaches. No longer was Britain casting itself as the imperial power, which once came to the countries of others, determined to shape their futures. Instead it was inviting the people of the world to come to Britain, where they might shape their own destiny.

"It worked because it's true," says Tony Travers. "People do want to come to dear old London because they see it as Dick Whittington saw it, as a place of opportunity, a place to make their fortune. That's true for all the Africans and Poles and Americans, to name but three, who are already here. It's true of the Games because it's true of the underlying reality."

You won't hear Sebastian Coe say this, for fear of annoying the rest of the country, but, in this regard at least, this was about London, not Britain. For years, the IOC had told Britain that if it were serious about winning the games, Manchester or Birmingham would not cut it: it had to be London. (That fits with a general Olympic shift, away from the likes of Montreal, Barcelona and Atlanta, and towards capitals and mega-cities.) And, if ethnic diversity was the pitch – the notion of London as a kind of world colony, settled by the peoples of the globe – then only the capital could make it. It is London, not Britain, that can boast of being the most plural and various spot on the planet (indeed, narrowing it down, Travers says that honour may well belong to the N15 postcode). London is less segregated than even that other great world city, New York, where communities tend to live in more tightly defined enclaves. But London is also different in kind, not just degree, from the rest of Britain. Between 35% and 40% of Londoners were born outside the UK, while in parts of the capital the number of babies born to mothers born outside the UK tops 50%. The offer of what Travers calls a "neutral homeland" for the 2012 Games is one only London, not Britain, could make.

There was a time when such talk would have spelled deep alienation between the capital and the rest of the country as well as arousing the ire of British traditionalists. Some people still speak of Planet London, as if the city were utterly separate from the rest of Britain. But it's not just the success of the torch relay that suggests such thinking is becoming out of date. Katwala reckons that diversity is no longer always understood as a break or rejection of Britain's past, as it once was, but rather as continuous with it. "It's a very British globalism, it says this is where our story has got us." It's about a river Thames that opens out on to the seas or about Shakespeare, celebrated in a festival this year as a global writer whose eyes were never just on Britain but on Rome, Athens, Venice and the great stories of the world.

Much of this shift has happened within the last decade. Traditionalists in the Thatcher period clung to the old verities of national identity while struggling with the new, varied face of modern Britain. Modernisers in the Blair period were comfortable with diversity but didn't know how to talk about the past. Part of the failure of the Millennium Dome was its aversion to history, its fondness for the novel, adhering to Blair's ruling that Britain was "a young country". What 2012 suggests, with its combination of the Queen's diamond jubilee and the Games, memorably condensed by Twenty Twelve as the Jubilympics, is a synthesis: a more comfortable affirmation of both our past and our present. Katwala says the old choice was between national pride on the one hand and acceptance that Britain had changed on the other: "Now we can be proud of the nation that has changed." It helps that the Conservative party is headed by a man who won the leadership in that Olympic bid year of 2005 by declaring he loved Britain as it is, not how it used to be.

It's a good bet that plenty of these messages will be conveyed in the opening ceremony on Friday night, depicting a nation that is both ancient and postmodern, that cherishes its green pastures as well as the grit and grime of its cities. It may be that none of that gets through to the outside world. Szymanski, British-born but now based in the US, says the American coverage has shown only snapshot glimpses of Britain by way of background – and it is still the cliches of old: "Big Ben. Tower Bridge. What will Kate be wearing? The royal family. Tea. Eccentrics. Bad weather. Dodgy infrastructure."

Maybe we should not let that worry us. Maybe, like some of the most successful host nations, we should just relax and invite the world to have a fortnight of fun, rather than fretting about legacy and meaning. But it's hard to relax when so much is at stake. Seven years ago we told the world that we could come together to stage a spectacular Olympic Games and that we were a kinder, gentler, more inclusive country, open to the rest of humanity. The world believed it. The question is, can we believe it too?