One limiting factor was that this wasn't scalable - so a lot of people would be comfortable with it because there is little potential for widespread abuse - there just aren't enough resources to search & monitor everyone's mail and houses at all times.
There are no such limitations online, so better protections such as encryption are required to counterbalance it.
I understand of course that scale is an issue online, but that doesn't affect the idea that encryption gives us basically unbreakable communication over a distance, and removing it is not eroding our last vestiges of privacy.
No one is saying anything like that.
Further, usually, a judge has to approve. There's at least some oversight and reasonable cause involved.
It's recently started to emerge that US opened and censored all international mail 1950-1989. We're talking millions of letters a week. It started as a measure to remove all reference to US use of biological weapons in the Korean War and grew from there. (the third season of the Blowback Podcast did a couple of interviews which covered it really well.)
This is still the case. That's not a good example of privacy being eroded.
Now most conversations have moved online, and a secret record can be cheaply created of exactly who is talking to who, when, how often, and in the absence of encryption, even what they are saying. Phones we all carry, even without spyware apps, can be located through signal triangulation, before we even get to facial recognition and omnipresent cameras, smartphone or otherwise.
That, theoretically, we can recover some of the privacy we used to have (so long as we don't get targeted surveillance, which has become so effective defeating it is nearly hopeless), does not mean that, in practice, privacy has been massively eroded for the average person.