In 2008, the International Monetary Fund published a dazzling flowchart that sought to explain, as the title put it, “The Theory of How the Financial System Created AAA-Rated Assets out of Subprime Mortgages.” As the IMF tells it, financial institutions bundled hundreds of subprime mortgages into mortgage-backed securities (MBSs), which were then divided, according to their levels of risk and earnings potential, into various tranches (the infamous AAA, AA, A, and so on ratings). These mortgage-sausages were then sold to investors as bonds. Not satisfied with this level of derivative, some financial institutions then took the lower-rated, higher-risk tranches of MBSs and repackaged them as AAA-rated Collaterized Debt Obligations (CDOs). For a while, other financial institutions were then taking the high-risk tranches of repackaged CDOs and repackaging them as so-called CDOs-squared. And when homeowners stopped paying their mortgages and banks foreclosed, the MBSs, CDOs, and CDOs-squared were not worth the paper they were rarely in fact printed on, and the economy collapsed like a circus tent.

All of that is clear enough in retrospect, but at the time the economic crisis and its causes seemed obscure, if not altogether unreadable. Like the shadow banking system – the hedge funds, the money market funds, and the structured investment vehicles – that played such an oversized (and underregulated) role in the crisis, everything remained in the dark. Flowcharts like the one made by the IMF hoped to clarify for an otherwise bewildered public how foreclosed-upon tract houses in the suburbs of Las Vegas could bring down Lehman Brothers, get your brother-in-law laid off from his job, and cause the worst global recession since the Great Depression of the 1930s. Under capitalism, Karl Marx wrote, all that is solid melts into air, and all of us who live through its “everlasting uncertainty and agitation” are sometimes left wondering, as we were in 2008, what the hell just happened.

In Downwardly Mobile: The Changing Fortunes of American Realism, Andrew Lawson argues that out of such bewilderment comes one of the most influential movements in American literary history, realism. Unlike most critics, who date the birth of realism to the decades after the Civil War, Lawson argues for an earlier origin, more or less coincident with the market revolution between 1815 and 1846. In particular, Lawson points to the role of the Panic of 1837 in what he calls “the emergence of the realist aesthetic” (16), or elsewhere “the mimetic urge” (17). Like our financial crisis, the Panic of 1837 was built out of real-estate speculation and a sudden credit crunch; like our crisis, too, it affected those who neither speculated nor borrowed. For Lawson, the Panic of 1837 “dramatically illustrated the ways in which individual lives were obscurely implicated in large-scale economic and political upheavals.” What is more, it “marks a moment in which the very nature of social reality becomes a pressing issue, a moment in which ‘reality’ itself is put under a new kind of stress” (2).

According to Lawson, with everything solid melting into air around them, readers, after 1837 and in the decades to come, “hungered for the real.” They sought a fiction that could restore solidity to their world. Such fiction could, as Lawson puts it, “counter the malign magic of the market revolution by creating a world in which things and people are legible, tangible, enduring, and real” (4). In other words, realism could make the real seem real again.

In addition to accounting for why realism arises when it does, Lawson also explores why those who invented realism went to the trouble. He argues that many of the writers who supplied readers' demands for realistic fiction – Rose Terry Cooke, Rebecca Harding Davis, William Dean Howells, Henry James, Hamlin Garland – were themselves victims of “the dematerializing reality and business failures” of antebellum capitalism. Hence the “downwardly mobile” in his title. It was these writers, the ones who were “most exposed to the ontological disturbances wrought by panic and depression,” who sought “to resist the derealizing effects of market turbulence by inventing realism” (4). Unlike history, that is, realism was written by the losers.

The remainder of Lawson's book offers readings of the early fiction of each of the writers listed above. Most of the chapters are interesting and persuasive. (Lawson, to his credit, does not shy away from tying the biographies of writers to their work.) An exception is the chapter on Rebecca Harding Davis and her 1861 short story “Life in the Iron Mills.” Although he notes her initial sympathy with the exploited and doomed ironworkers who populate her story, Lawson argues that Davis ultimately distances herself from her main character, Hugh Wolfe, because his desperation to escape the constraints of his class resembles her own a bit too much for comfort. I am not convinced, but it may be so. Decidedly less persuasive is Lawson's attempt to tie Davis to the critiques of northern capitalism – and the defense of southern slavery – offered by southerners like George Fitzhugh and William Gilmore Simms. Slave-owners, the argument went, have a proprietary stake in the well-being of their slaves, and thus tend to treat them well, whereas workers in factories mean nothing to their employers and are treated accordingly. At the end of “Life in the Iron Mills,” while Wolfe rots in jail, he sees in the street a “laughing” mulatto girl following her mistress, and, for Lawson, this is supposed to illustrate that Davis is aligning herself with such arguments about the superiority of southern slavery over northern capitalism.

Yet the laughing mulatto girl is a slim reed to hang such an enormous argument on, especially since, at the beginning of the story, Davis is at pains to describe the “negro-like river slavishly bearing its burdens day after day,” which does not sound nearly so happy. As with the rhetoric of wage slavery popular during the period, it seems just as likely that Davis is comparing the working conditions of ironworkers like Wolfe to the working conditions of slaves like the mulatto and finding the former, in some cases, just as bad, if not worse, than the latter. That attitude is not without its problems, but just because something (wage slavery) is equal to or worse than something else (slavery qua slavery) does not mean that the person making the comparison is endorsing the something else, or, if given the choice, would prefer it. It only means that there is no shortage of ills in the world.

But missteps like these are rare. For the most part, Lawson is a reliable guide through the rise of realism in the middle decades of the nineteenth century. (The chapters on Henry James and Hamlin Garland are especially fascinating.) Just as realist writers clarified the real, Lawson clarifies why realism emerged when it did. Like the IMF and its flowchart, or the realist novels themselves, Lawson helps us trace something – the origins of literary realism – that would otherwise remain obscure.