There are many points involved, including (in no particular order):

1) It's subverting the usual innocent until proven guilty model - why not presume everyone is doing wrong and just keep watching until you find them? Because that's not just.

1.1) Cost - most people aren't doing wrong, if they were everything would fall apart. Erosion of trust issues.

1.2) Well, everyone is doing wrong. And getting away with it. And that's OK. It's how things work. A good deal for a friend, an early warning, you scratch my back I'll scratch yours, nudge nudge, wink wink, say no more. On the small, local, personal level, it's fine - or at least, not always bad, which is practically the same thing. Besides, have you seen how many laws there are? You could be a lawyer all your life and still not even have skim-read once all the laws that you are legally obliged to follow at all times!

2) It's a power thing - someone is deciding what 'wrong' is, and it damn well isn't you or I. And what is 'wrong' will change year on year, governement on government - but your records will always be there to be searched for the new kind of wrongdoing (wrongbeing, wrongthinking, etc).

3) It's very much a power thing. It's always presented in the form of a government or corporation watching the populace. It's never presented "If you've done nothing wrong, stream videos of your boardrooms and offices to the world".

4) Knowledge is power. Where there's a hill, a pressure difference or a voltage difference, there is power. Knowledge is no different - there is power in a knowledge difference as well. Building up your skillset is generating a knowledge differential that makes you more valuable. Industrial espionage is shorting a knowledge gap to weaken its power. Insider trading is illegal because people with high pressure knowledge have a strong advantage. Mass invasion of privacy by government weakens your power against government (and increases their power over you), by companies weakens your power as a consumer, by everyone weakens every knowledge difference. You don't get a better environment, you get everything-the-same heat-death brown, all the hills flattened and the valleys filled in, if I can mangle some geography, cosmology and colouring in.

5) "If you've done nothing wrong, you've nothing to hide" is a false dichotomy, it implies that you only hide wrongdoing. I hide birthday presents and surprise parties. I hide my bank details so people can't take money from me. When parking my car, I hide things in the glovebox so they aren't stolen. I hide my government bureaucracy papers so people wont steal my identity. I hide my interest in computing so people wont take the piss. None of these things are 'wrong' but they are still valid things to keep quiet about, IMO.

6) It implies anonymity is wrongdoing, yet we have anonymous voting because otherwise it would be vulnerable to more corruption, checking if you voted for the 'right' party.

7) People are obliged to wear clothes to cover genitalia, because having visible genitalia is a social 'wrong'. This has elements of hiding something because you are doing wrong (or being wrong), yet the hiding is the right thing to do in the current social climate. To some extent, right and wrong are fuzzy (See PG's essay on Thoughts you can't Think) yet you expect me to believe that there's a simple line around 'doing wrong' that someone else could see if only they could watch me more?

8) Judgement takes knowledge and experience. Do you really want every Tom, Dick and Harry government employee jumping down your neck with accusations of wrongdoing because they have no clue about your work or industry? "Why are you sitting there doing nothing while still on the clock? Scamming the customer, are you?" "No, I'm thinking of an algorithm that will scale to all their documents" "Thinking of an amalgam... amalgamation? You're not going to the dentist or buying a company, get back to work!"

9) Government and companies are paid for by taxpayers and customers. Do you want to foot the bill for them to watch you in case you are doing wrong?