It may not be the only way to develop talent, and there may be plenty of good MLB players who didn't start off as elite amateur prospects and went just about anywhere in the draft, but those elite guys go a long way toward building a farm system. It's not enough to just say "outdraft and outdevelop everyone else." There's that, and there's also adding the elite guys who are more likely to turn into big leaguers.
As for what the right answer is, I don't really know. This new CBA is horsebleep. All of this new money from TV contracts and everything is just going to an inflated market of late and post prime free agents.