One of the interesting details about how people read fiction in the past is that there was no distinction between popular fiction and literary fiction. Working-class readers would be consuming the same books as middle-class readers. Classic literature gained that status because it was literature which people actually enjoyed, and became sufficiently embedded within popular culture that the books would be remembered for generations afterwards.
In the mid-twentieth century, however, you have a bifurcation, where you end up with popular fiction and literary fiction. Then, as time has gone on, literary fiction has become more rarefied, into what we have today. My feeling, is that literary fiction doesn't actually exist for an audience, but for the self-image of the writer. Most writers of fiction in the past had life experiences that fed into their writing; now the best we can normally expect is that someone has been a lifestyle journalist, or waited tables whilst a student. They want to be a published author of literary fiction, because of the status it bestows, but they have nothing interesting or meaningful to say.
One reason why bad books are published, is that they are generally commissioned unwritten, based on a pitch. And, of course, what is going to assist your pitch more than the ability to perform authorship, and the acquisition of the right credentials, in the form of a creative writing course. So, we have ended up with a situation where people go off to university to study postgraduate writing courses, where they learn to be an author, but don't learn anything about how to write a book which people might actually want to read.
(The publication of academic monographs is, I would argue, even worse; the normal print run is 500 copies, and the publisher aims to persuade academic libraries that they absolutely need to buy a copy for their collection at 75 pounds. No-one in the publishing industry pays attention to what actually appears within the book beyond how it can be sold to a library.)
One of my favourite pieces of writing on literature is Italo Calvino's essay "Why Read the Classics?" It's pretty short, running to a mere seven pages in my printed copy, but it's clear, lucid, and focused on the pleasure and engagement which comes from classic literature and is, indeed, one of the way he defines the classics. It was written in 1981, and I just can't see anyone discussing modern literary fiction in this manner.