I am trying out some ideas here concerning Goethe's notions concerning the above subjects; if anyone notices errors or misleading judgments, please let me know.
The art instinct, in particular poetry (Dichtung), is common to all people. This instinct is innate. One might say a natural endowment, and its products, in their most archaic or original form, are not those of the educated or elite class, but derive from the common experience of people. All men have similar dispositions, needs, etc., the expression or fulfillment of which is modified or enriched according to the environment, in the widest sense of that term. The Volksdichtung (folk poetry) of various peoples will be diverse in the reflection of ethnic peculiarities -- Herder spoke of "Stimmen der Völker" -- but will manifest a common existential content: love, war, pieties, and so on, as experienced within the archaic or primitive milieu.
World literature is an expression of advancing civilization, but it is also concerned with what Fritz Strich (in his study of Goethe's concept of world literature) refers to as "geistige Genossenschaft" (intellectual comradery), not in the universalist way of "Weltpoesie," but between and among modern classes of people. Goethe's concept sounds Eurocentric to 21st-century ears, but Goethe could hardly have envisioned in the early 19th century that non-European peoples would take their place among the moderns. His interest in non-European literature was as an expression of Weltpoesie. He certainly recognized that Persian and Chinese poetry were not instances of folk poetry, the purest form of Weltpoesie, but of advanced civilizations. They emerged (I am extrapolating here) from a different source from the literatures of Europe. The source of the latter, for Goethe, was classical literature. He also acknowledged that "the Orient" (Old Testament and New Testament) was part of this European foundation.
Goethe's animus against the German Romantics had much to do with what he saw as their undermining of this foundation. According to Ernst Behler, Goethe believed they were too attracted to emotion, subjectivity, formlessness, dilettantism, fantasy, false piety (Frömmelei), and antiquarianism and nativism (Altertümelei und Vaterländelei). Though Brentano and Arnim, for instance, were talented, what they wrote was without form and character. As Goethe wrote (in a letter to Zelter in 1808) concerning the poetry of this younger generation, they fail to understand that the highest and unique operation of nature is that of endowing with form: "Gestaltung." Form must in turn be "specific," not vague or amorphous, as he thought the case with Romantic poetry.
Picture credits: Inner Mongolia News; BigFoto