I had no idea that literary fiction was a genre rather than a generic term for fictional literature until I read this:

https://en.wikipedia.org/wiki/Literary_fiction

There is a very simple explanation for the decline. The books are garbage that only masochists enjoy and that sadists force children to read in school. The description “Literary fiction may involve a concern with social commentary, political criticism, or reflection on the human condition” is full of antipatterns that are largely the mark of bad literature, since they miss the core purpose of fictional literature, which is to entertain. This is why “light novels” out of Japan and adaptations of them are popular while literary fiction is not.