Why were poems and stories that reflected events of the day needed early in the 20th Century? What purpose did they serve?

An interesting question. People have always written about current events, but, arguably, the First World War, combined with the rise of Modernism, meant that the poetry and literature of the First World War era reflected day-to-day events with greater realism than anything that had come before. Even a comparison between poetry from early in the War, such as Rupert Brooke's idealistic "The Soldier," and the vivid realism of poems like Sassoon's "Suicide In The Trenches" gives an indication of the change. But what was the purpose of these apparently demoralizing poems showing the reality of war?
For Sassoon and Owen, they wrote as a means of showing truth to those at home who received only a false idea of what was really going on, filtered through a lens of propaganda. Their poems brought home, back to those who had not experienced the war, what was really happening: the incompetency of the generals, the suffering of those who returned home missing limbs, and the truth of how many would not return home at all. After the war, many who had fought in it went on to write longer memoirs of their time fighting, like Sassoon's Memoirs of a Fox Hunting Man and Graves's Goodbye to All That. On a personal level, writing these works helped them to process what they had seen. On a wider scale, people read these works because the world was changing so enormously that fictionalized accounts and poetry about that changing world was one way both to normalize it and to come to grips with it. Poetry and literature can be for the purposes of escapism, but it can also serve an important purpose in presenting a mirror of the world to those who have to live in it, through which they can understand themselves better.