Year's best stories -- so-so; Prize Stories 1980: The O. Henry Awards, edited by William Abrahams. Garden City: Doubleday & Co. $12.95

Reading the O. Henry stories each year is a little like studying tea leaves or tossing the I Ching: One keeps looking for signs. Is the short story finally dead? Is there, perhaps, a young genius stuck away in some distant hills who's molding the story into new and original shapes -- as, for instance, Tillie Olsen , who in "Tell Me a Riddle" actually usedm the shortness of the form to experiment in ways that would have been tedious in a novel?

Well, the news about this year's O. Henry stories is predictable to followers of the form: The short story isn't dead, but it's not doing too well, either. If anything, most of these stories seem nothing less than petrified -- they're competent, graceful, nicely coiffed, yet, despite their concern for contemporary subjects (women's lib, men's lib, the aged) they're profoundly dated as well. What's really disturbing is their smallness. It's as though editors got together 50 years ago and decided that short stories should act like well- behaved midgets, neat, and polite to a fault, and no one has thought to question the decision since.

Of the prizewinning stories -- "A Silver Dish," by Saul Bellow, "Women in a Roman Courtyard," by Nancy Hallinan, and "The Men's Club," by Leonard Michaels -- only the last tries for something new. Though touching, Bellow's story echoes his early novel, "Seize the Day"; and Hallinan's piece, perhaps because of its subject matter (a family disintegrating in Rome's impossible summer heat) has just the kind of WASPish, flat characters short stories seem to be cursed with. Even the Michaels contribution, a series of pained anecdotes told by veterans of Berkeley's sexual wars, doesn't quite fit together as a whole; the story seems crowded and tentative and is more likely the beginning of a novel than a piece meant to stand on its own.

The best stories this year -- and there are some good ones, despite my carping -- are the leisurely and open-ended, the ones most like cracker-barrel chats. (It may come as no surprise that they're mostly by Southerners.) Stories by Shirley Ann Taggart, Jayne Anne Phillips, and Alice Adams each have this unhurried, informal quality, but the real prizes are by two older writers, Jean Stafford (who passed on before this book went to press) and Peter Taylor. Both Stafford and Taylor give life back to the form -- or, more to the point, they make one feel that writing short stories is as natural as telling a friend an incident that's been on one's mind for years.

Stafford's piece is a long autobiographical reminiscence about an "awful" summer when "every poet in America came to stay with us," and where the narrator , wife of the vainest poet of all, has to cook and clean for the whole crew. The narrative voice of this story is so touching and unpretentiously intelligent that it takes us right through the banality of the summer into more serious territory, into a personal mental landscape deeper than bad poets and cocktail parties can reach. Taylor's story is even more impressive. Another long reminiscence, it's about a young Southerner's relationship to a girl of the Memphis demimonde, a group of lower-middle-class girls both more liberated and more lost than the aristocratic girl he eventually marries. Complex, meandering , written with the gentleness of a Southern drawl, the story does what only the very best contemporary short fiction can do: It gives us a sense that the author's world is so rich and many-facetted that it can't be tied up and packaged within the confines of a single piece of fiction -- only another story, and then another and another, can keep giving us glimpses into it.

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