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Perhaps your experience with it has been negative but I personally know of half a dozen people who have had fantastic experiences. Sure there may be inexperienced people on there but there are also successful designers too. Elance is the same – there is good amongst the dodgy. And it is also worth bearing in mind that some of those kids with their cracked copies of illustrator are at least getting off their butts and trying to find work. Just because they may not have the budget to start with a big flashy website and agency does not mean that they are not necessarily good designers. That is a very narrow minded view. I have had terrible experiences with design agencies who have huge amounts of experience. It is all about being open to the fact that these days there are different ways of doing things, and different ways work for different people. I am not saying it is normal, I am just saying it is a different option which works for some.
With a car mechanic they need knowledge and experience to know how to fix your problem. With a designer, sure they need to know about branding and how to market to a particular type of client, but they also need to know how to design and that, in my opinion, comes from instinct. I would much rather give a talented kid with no big $ backing, but bucket loads of talent, an opportunity than use a big agency with a fancy website who are just as likely to delegate the job to design juniors who they probably pay less than I would pay to someone on 99 Designs.

At the end of the day, neither way is wrong. They are all just options. Plenty of room for everyone I am sure.

Have a nice day.