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Yeah, but I don't think he argues that literature doesn't exist so much as that it's, as you suggest, a socially constructed by-word for 'quality writing in a certain style' - an idea he ultimately borrows from poststructuralism and which I think he's probably quite right about. He then unnecessarily 'Marxifies' the whole thing with his rather less persuasive 'privileging' (in terms of class) argument.
I never studied literature but his impact in British academia is pretty wide, to the extent that I wouldn't be surprised if physics students here aren't expected to wade through him at least once during their degree.
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