Unfortunately, Literary Fiction has become just another genre, like romance and chick lit, but directed at a reader with higher education, and defined as what people with MFAs write. Indeed, some literary agencies consider an MFA to be a threshold qualification for anyone claiming to write literary fiction.
I agree with you that it is often boring, but in my view, the “lesser genre” are even more at fault, in that respect, for being so predicable and formulaic. The whole point of writing to genre is to give readers what they want, not what the writer seeks to express. In the case of the lesser genre, that would be a familiar story. In the case of literary fiction, pretty prose, complex characters, and politically correct ideas. None of them taxes the mind very much.
I agree with the previous commentator that Joyce initiated the split between the romanze and the literary novel. His work became the paradigm for much of twentieth century “literary” fiction and I believe a new one is needed.
Having recently picked up Molloy, considered one of the greatest works of the literary fiction genre, I can tell you it was quite an undertaking, given that there are no breaks in the narrative for several hundred pages. It would have required setting aside a huge block of time to appreciate it, and I simply could not get interested enough. I feel much the same way about Thomas Pyncheon, Don DeLillo, David Foster Wallace, and others, ad nauseum.
What’s needed is an imaginative literature that is neither safe, nor necessarily pretty, nor formulaic in its construction; a literature of bold ideas that challenges the status quo both artistically and politically, but written as much to entertain as to inform. A literature written only for PhDs has no chance of influencing the masses and must, therefore, remain inconsequential.