I get the sense from colleagues and visiting different universities that this varies across the US, Canada, the UK, and the EU, but grants are now the bread and butter at most US universities. It's not really enough to publish 100s of articles, or have a high h index, it's to bring in money even if it's not strictly necessary for your research.
Part of the reason we have the problem you're mentioning is not that there isn't enough money to go around, it's that universities (at least in the US) now depend on inflated costs to function. The costs of research are kicked down the road to the federal government, and the research itself is seen in terms of profits rather than discovery. So if you have all these universities essentially telling researchers their jobs are on the line if they don't bring in profits, you're going to have everyone scrambling to bring in as much money as they can. It's not just postdocs or untenured research professor lines, it's tenured professors as well, whose income can be brought down below some necessary standard of living, or who can have salaries frozen or resources cut.
I was thinking about this the other morning. I had a grant proposal that the program officer was really excited about. This program of research could probably be conducted for almost nothing because it involved archival data analysis. However if you put a dollar amount on the time, it might realistically actually cost around 250k USD, maybe 500k max, pretty generously in terms of staff effort. However, the university managed to inflate the budget ask to around 2 million for the sole purpose of indirect funds.
When you have that kind of monetary incentive (carrot or stick), of course you're going to have thousands of persons applying for each opportunity. It's what led to the graduate student ponzi scheme, inflated numbers of surplus graduates, etc and so forth.
It all trickles down too, in terms of research claims, p-hacking, etc and so forth.
There's a place for profit, but there's also some realms where it does nothing but corrupt.