Say you're trying for a job and don't get it even though you are just as qualified if not more so than another applicant. Why? Because they have a friend who knows the boss or something. Sorry, but that has always riled me. Not cool at all. So when connections are mentioned in the context of agenting my reaction is the same. The best books should get published. Publication shouldn't be based on who knows who. And I would hope that is more or less how things play out. Favoritism to me is synonymous with cheating.
And if favoritism is a given then I almost feel like not trying for an agent and pitching publishers directly. At least then if I happen to get a deal I will know it was based on the book's merits rather than handshakes, smiles, and g*d knows what else !
I don't think the two situations are comparable. In the job market, you typically get a job by applying directly for a position. Having connections can help, but the standard process is to submit your application to your prospective employer.
This process is completely different in the market for trade publishing. You don't send your books to editors/publishers; agents do. The reason they can succeed in getting a book in front of an editor is because they know editors and the editors know them. Because the agents know the editors, the editors trust them to present books they'll enjoy and be able to help publish. It's
their job to know the people in the industry.
Editors/publishers aren't going to trust the random Joe Schmoe who says "Hey! I have the best book in the world!" Why? Because there are too many people to trust. Agents act as the middleman that helps filter out the crud from the marketable stuff.
There's nothing shady about it. No "g*d knows what else", unless "g*d knows what else" means being up-to-date on the market and being able to acquire clients with high-quality manuscripts. I understand your frustrations with connections in a job search setting, but in the publishing world, agents wouldn't have a job if they didn't know anyone else in the business. One of the reasons they are so valuable is they're the ones who can get your book in front of an editor; you can't do that on your own because you don't have the right connections. And that's fine. Ideally, it will help the editors see the manuscripts with the most merit because the agent will filter out the cruddy books. Good agents know what editors want thanks to their connections.
It has less to do with favoritism and more to do with trust.