That's the writerly equivalent of the realtor's mantra--it's taken on faith that everything, in literary fiction, is subservient to character. I've never quite bought it--I like plot, and talk about it often when I teach writing classes. At a weekend seminar on novel writing at a college, I once suggested that students might want to outline the plot of their novel. I was met with stunned silence. "We're not supposed to talk about plot," someone actually said.
But you know what? It's true. Everything is subservient to character. Even in popular fiction. Especially popular ficiton. I just read the new Richard Stark, Ask The Parrot. In it, Stark/Westlake's criminal protagonist, Parker, gets involved in a heist at a racetrack, and of course everything goes wrong. At first glance, the book is all plot, delivered in the unadorned, supremely efficient Stark prose--a manhunt, a car chase, a shootout. But nothing that happens happens for no reason. It all happens because of who people are--the nosy granddaughter, the paranoid mechanic, the guilty father, the disgruntled employee. Stark's brush is broad, his characters tend to fall into types, but there is no question, they are running the show. They make things happen--specific things--because of who they are.
This is why I'll choose skillful noir over bloated lyricism any day--character beats language, hands down. I think the reason I was so jazzed up over the Zadie Smith the other day is that, like Stark, she actually notices people, and makes them act out their desires. Of course Smith's got the chops in other areas, too--all of them, really. Think of the Stark book as the best after-dinner mint you ever had.