"A good part of the baggage process is in a part of the airport that is physically quite complex and, in many areas, dark." He adds: "Your bag may be traveling for several miles" in this maze, and watching it at every step along the way just isn’t feasible.
That's a ridiculous excuse. The police, FBI, or whatever law enforcement agency could put hidden cameras and microphones in various luggage--packed with expensive things that are worth stealing--as part of a sting operation. If there's a serious problem (keeping in mind that the average loss is 0.5%), then they'd be able to nab the crooked TSA agents or baggage handlers after just a couple dozen runs.
The reason this is not done is because this is boring to police. It is not a glamorous or interesting kind of crime to solve, and nor does it make money like speeding tickets or parking tickets.