The dictionary defines the word 'literature' as follows:
written works, especially those considered of superior or lasting artistic merit.
books and writings published on a particular subject.
leaflets and other printed matter used to advertise products or give advice.
In other words, as with many words in English, one word can have several meanings.
I take your point, though. That said, let me comment.
"Yes - of course you can tell a good story, and makes lots of cash from selling it, with non-developing characters..."
And that's the bugbear, isn't it. Literary writers deeply resent that us common people don't enjoy their great works, and we spend our money in stories we enjoy. I read fiction to escape. I read non-fiction in order to learn about the world. And I read plenty of it.
D'Artagnan is a young man when he joins. Certainly, the writer reveals more about him as the story progresses. That is not a change in character. It is simply revealing the character of the man to the reader. This is called characterization.
For instance, I have had many readers over the years. Those people who have been reading me for a decade know me well. My character has not changed. People's character's seldom change. What changes is their level of knowledge, and we expect that. It's not what a story arc is about.
Character development also has nothing to do with a story arc. Character development simply means that one reveals more and more about the character. A story arc, on the other hand, is about the character of the person changing, i.e. he is going from bad to good, from good to bad, or his character does not change at all. That is called a flat character. It doesn't have anything to do with characterization.
Well, I guess, I have no interest in literature. I understand people . One cannot be a good writer if one does not understand people sufficiently well to enable the reader to relate to the characters.
I think the real issue, John, is that the kind of people who tend to study 'literature' are people who are unhappy at some level. They are looking for something within themselves, within life, etc. They are constantly searching for meaning. So any book that touches on the agony or confusion of another is something that they relate to. That has always been my observation.
If my point of view has errors, let me know. Thanks.