Recent discussion on the Old Testament assumes that literacy was not common. It may not have been, but the assumption appears to be that it was less common than it may have actually been. One of the larger problems is that the arguments proceed on the basis of assumptions without actual data. It is worth looking at how much inscriptional evidence from pre-exilic Israel there actually is. The following information is culled from F. W. Dobbs-Allsopp, J. J. M. Roberts, C. L. Seow, and R. E. Whitaker, Hebrew Inscriptions (New Haven: Yale University Press, 2005). I have only included the provenanced inscriptions.
Tenth Century (3 inscriptions; 1 from Israel, 2 from Judah)
Tel Batash 1
Ninth Century (11 inscriptions; 5 from Israel, 6 from Judah)
Tell el-Hammah 1
Eighth Century (391 inscriptions; 126 from Israel, 260 from Judah, 5 from Assyria)
Arad 40-42, 44, 46-57, 59-69, 71-80, 89-90, 92-93, 96, 98, 99
Tell Beir Mirsim 1-6
Tel Dan 1
Gibeon 1-62 (83 inscriptions only mentioned)
Hazor 5-9, 14
Tell el-Hesi 1
Tel Ira 4
Jerusalem 4-5, 7-11, 17-18, 23-24, 28, 32, 34-35, 78
Kadesh Barnea 7
Kuntillet Arjud 2-3, 5-11, 14-15, 18-21
Tell en-Nasbeh 2-5
Tell el-Oreimeh 1-2
Tell Qasile 1-2
Khirbet el-Qom 3-4, 6-9
Ramat Rahel 1
Samaria 1-107, 111-19
Siloam Tunnel 1
Silwan 1-2, 4
Seventh Century (56 inscriptions; 54 from Judah, 2 from Persia)
Arad 24-28, 32-39, 58
Tel Batash 2
Tel Ira 1-3, 6-7
Jerusalem 1, 3, 6, 19, 25-27, 29-31, 33, 79
Kadesh Barnea 2-3, 9
Mesad Hashavyahu 1-2, 4-7
Khirbet el-Meshash 1, 3
Wadi Murabbaat 1
Khirbet el-Qom 1-2, 5
Horvat Uza 1-4
Sixth Century (68 inscriptions; all from Judah)
Arad 1-23, 29-31, 110-112
Kirbet Beit Lei 1-7
Jerusalem 2, 16
Ketef Hinnom 1-2
Lachish 1-9, 11-13, 16, 18-22, 25-34
Unknown (9 inscriptions; 3 from Israel, 6 from Judah)
Arad 81, 88, 97, 104
Beth-Shean 2-5 (counted as one inscription)
Hazor 15, 18
Kadesh Barnea 6, 10
Many of the eighth century inscriptions might be seventh century. At any rate, during pre-exilic times a scribal culture is well attested in Judah and Israel. We should note that the inscriptional material listed is confined to ostraca (potsherds), pottery vessels, and stone surfaces. This, however, it not the main writing surface that was used in ancient Israel and Judah. While animal skins are a possibility, the best attested writing surface archaeologically is papyrus. This is because bullae, mud seal impressions with impressions of the papyri and sting on the back attest to papyrus documents being used even if the papyrus no longer survives.
The year that Hebrew Inscriptions came out, another tenth century inscription was found at Tell Zeitah in Judah (see Richard Hess, "Writing about Writing," Vetus Testamentum 56/3 (2006): 342-46.
The tenth century inscriptions include two inscriptions indicating ownership, a scribal exercise, and a list of agricultural activities. The scribal exercise indicates that there is some form of scribal training. The ownership inscriptions have be taken to indicate how few people wrote. "What they
another." (Alan Millard, The Journal of Theological Studies 49/2 : 701-702.) There is no point of putting your name on something if no one can read it and know that it is yours. If people are going to mark objects with their names enough people have to read enough to know whose name it is. These are words not personal or corporate logos.
A significant number of the inscriptions come from large caches of texts (such as Arad, Lachish, Samaria, Gibeon). In only takes one of these to drastically change the picture.
Writing is more frequent in Judah than it is in Israel. The attested inscriptional evidence does not support a hypothesis that writing started in Israel and then moved to Judah. There is also no real basis for claiming that Judah was less "articulate" than Israel.
It might be possible that David and Solomon were able to run their empires without writing (though I doubt it). The Bible does not credit David with annals. Jeroboam, however, had spent time in the royal courts in Egypt and had seen what use writing could be. Solomon certainly had some exposure to the practices of courts in other countries as well. These are the kings that the Bible starts to attribute annals to. The inscriptional evidence shows a wide-spread scribal network throughout the Israelite monarchies. The tenth century, though, has enough inscriptional evidence to argue that the rise of Israelite literacy coincides with the rise of the Israelite state (which is what we find in both Mesopotamia and Egypt). We could always wish for more evidence, but we should not underestimate what we do have.