It's possible that the point of the sterilization isn't really to end nepotism, but to ensure that the 3% can't ever have children. We don't really know much about the Offshore or what the Founding Couple really intended. Maybe the whole thing is to ensure that the "I'll climb to the top by stepping on the heads of those beneath me" group are kept separate from the rest of humanity. The Offshore could essentially be a prison. The world that we get to see looks like hell. It's likely there aren't enough resources to sustain a population at any level of comfort, so why not remove those predisposed to tyrannical behavior who might make things worse with their ambition?
They talk a lot about merit and deserving the reward of the Offshore, but what real merit is displayed during the show? Determination perhaps, but those who make it to the end don't seem any smarter, stronger, skilled, or creative than many we see get eliminated. The truly psychotic candidates are eliminated (Marco), but then society usually weeds those out anyway. The "winners" of the process (at least those we know) are generally competent in various ways, but they're also callous and deceitful. The mix of ambition, competency, strong will, and disregard for others is maybe the most dangerous combination of qualities a person can possess. So when the world can't afford to have those people around, but they are too likely to always remain in power, how do you stop them? Remove them from society, tell them it's because they're special, give them a lifestyle that is above everyone else, and take away their ability to reproduce.
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