This picture of the C.I.A.'s secret war of ideas has cameo appearances by scores of intellectual celebrities like the critics Dwight Macdonald and Lionel Trilling, the poets Ted Hughes and Derek Walcott and the novelists James Michener and Mary McCarthy, all of whom directly or indirectly benefited from the C.I.A.'s largesse. There are also bundles of cash that were funneled through C.I.A. fronts and several hilarious schemes that resemble a "Spy vs. Spy" cartoon more than a serious defense against Communism.

Traveling first class all the way, the C.I.A. and its counterparts in other Western European nations sponsored art exhibitions, intellectual conferences, concerts and magazines to press their larger anti-Soviet agenda. Ms. Stonor Saunders provides ample evidence, for example, that the editors at Encounter and other agency-sponsored magazines were ordered not to publish articles directly critical of Washington's foreign policy. She also shows how the C.I.A. bankrolled some of the earliest exhibitions of Abstract Expressionist painting outside of the United States to counter the Socialist Realism being advanced by Moscow.

In one memorable episode, the British Foreign Office subsidized the distribution of 50,000 copies of "Darkness at Noon," Arthur Koestler's anti-Communist classic. But at the same time, the French Communist Party ordered its operatives to buy up every copy of the book. Koestler received a windfall in royalties courtesy of his Communist adversaries.

As it turns out, "Animal Farm" was not the only instance of the C.I.A.'s dabbling in Hollywood. Ms. Stonor Saunders reports that one operative who was a producer and talent agent slipped affluent-looking African-Americans into several films as extras to try to counter Soviet criticism of the American race problem.

The agency also changed the ending of the movie version of "1984," disregarding Orwell's specific instructions that the story not be altered. In the book, the protagonist, Winston Smith, is entirely defeated by the nightmarish totalitarian regime. In the very last line, Orwell writes of Winston, "He loved Big Brother." In the movie, Winston and his lover, Julia, are gunned down after Winston defiantly shouts: "Down with Big Brother!"

Such changes came from the agency's obsession with snuffing out a notion then popular among many European intellectuals: that East and West were morally equivalent. But instead of illustrating the differences between the two competing systems by taking the high road, the agency justified its covert activities by referring to the unethical tactics of the Soviets.

"If the other side can use ideas that are camouflaged as being local rather than Soviet-supported or -stimulated, then we ought to be able to use ideas camouflaged as local ideas," Tom Braden, who ran the C.I.A.'s covert cultural division in the early 1950's, explained years later. (In one of the book's many amusing codas, Mr. Braden goes on in the 1980's to become the leftist foil to Patrick Buchanan on the CNN program "Crossfire.")

The cultural cold war began in postwar Europe, with the fraying of the wartime alliance between Washington and Moscow. Officials in the West believed they had to counter Soviet propaganda and undermine the wide sympathy for Communism in France and Italy.

An odd alliance was struck between the C.I.A. leaders, most of them wealthy Ivy League veterans of the wartime Office of Strategic Services and a corps of largely Jewish ex-Communists who had broken with Moscow to become virulently anti-Communist. Acting as intermediaries between the agency and the intellectual community were three colorful agents who included Vladimir Nabokov's much less talented cousin, Nicholas, a composer.

The C.I.A. recognized from the beginning that it could not openly sponsor artists and intellectuals in Europe because there was so much anti-American feeling there. Instead, it decided to woo intellectuals out of the Soviet orbit by secretly promoting a non-Communist left of democratic socialists disillusioned with Moscow.

Ms. Stonor Saunders describes how the C.I.A. cleverly skimmed hundreds of millions of dollars from the Marshall Plan to finance its activities, funneling the money through fake philanthropies it created or real ones like the Ford Foundation.

"We couldn't spend it all," Gilbert Greenway, a former C.I.A. agent, recalled. "There were no limits, and nobody had to account for it. It was amazing."

When some of the C.I.A.'s activities were exposed in the late 1960's, many artists and intellectuals claimed ignorance. But Ms. Stonor Saunders makes a strong case that several people, including the philosopher Isaiah Berlin and the poet Stephen Spender, who was co-editor of Encounter, knew about the C.I.A.'s role.

"She has made it very difficult now to deny that some of these things happened," said Norman Birnbaum, a professor at the Georgetown University Law School who was a university professor in Europe in the 1950's and early 1960's. "And she has placed a lot of people living and dead in embarrassing situations."

Still unresolved is what impact the campaign had and whether it was worth it. Some of the participants, like Arthur M.

Schlesinger Jr., who was in the O.S.S. and knew about some of the C.I.A.'s cultural activities, argue that the agency's role was benign, even necessary. Compared with the coups the C.I.A. sponsored in Guatemala, Iran and elsewhere, he said, its support of the arts was some of its best work. "It enabled people to publish what they already believed," he added. "It didn't change anyone's course of action or thought."

But Diana Josselson, whose husband, Michael, ran the Congress for Cultural Freedom, told Ms. Stonor Saunders that there were real human costs among those around the world who innocently cooperated with the agency's front organizations only to be tarred with a C.I.A. affiliation when the truth came out. The author and other critics argue that by using government money covertly to promote such American ideals as democracy and freedom of expression, the agency ultimately stepped on its own message.

"Obviously it was an error, and a rather serious error, to allow intellectuals to be subsidized by the government," said Alan Brinkley, a history professor at Columbia University. "And when it was revealed, it did undermine their credibility seriously."