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The story's exposition is found in the details that the author uses to reveal where and when the story takes place. Based on the narrator's observations, the reader is able to infer that he is actually in New York City. For instance, he sees a statue of George Washington, but all he sees of the name is the "ASHING." He sees the subtreasury building, but all he sees of the name is "UBTREAS." He also sees the Biltmore Hotel, and remnants of modern technology such as hot and cold faucets. The reader is also able to infer that there has been a nuclear holocaust, based on the narrator's stories of a "Great Burning." This gradual revelation is the story's exposition.
Exposition refers to the introduction of background information that provide a reader with an understanding of setting, characters, or context. In Stephen Vincent Benét's short story, "By the Waters of Babylon," the exposition sets up the premise of the protagonist's life in a post-apocalyptic world.
The opening of the story establishes the rules of this land, which was once part of the civilized world, but has since been rendered ruined. The narrator, John, explains his position as the son of a priest and outlines some of the laws that have been established in this place. People are not permitted to travel east, to cross the river, to go to the Place of the Gods, or to go to the Dead Places" (unless searching for metal). These rules are described as being "well made"; they are created to protect the living from the "spirits" and "demons" that dwell in those regions.
All of this is significant because it sets up the reader to understand why John's spiritual quest is so dangerous; John plans to travel to the Place of the Gods, despite the forbidden nature of this task. The rest of the story follows this journey and John's eventual discovery of "the place of New York" and his new convictions that human beings must re-construct their civilization.
In literature, the exposition is the introduction of certain details to the reader. In a typical plot chart the exposition comes first, and it is followed by the rising action, the climax, the falling action, and the conclusion. The exposition, then, is the part of the story where the characters are introduced, some background is explained, and the setting is described.
Unfortunately, the exposition of "By the Waters of Babylon" is incredibly vague. My students do not like reading this story because it is so confusing at first. The reader has no real idea where the story occurs geographically or even whether or not the story is taking place in the past or in the future. The only definitive detail that the exposition contains is that the story's protagonist is named John. His father is a priest, and John is in training to be a priest, because he held some metal and didn't die.
As John discovers things, the reader discovers more details about the setting. The story takes place in the far future, and the location is in what is now New York.
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