I'm still a firm believer in paying your dues... When I have kids they will play Fender Squires before they touch my USA Fender Strats. God forbid they take a liking to Les Pauls...... They might just find themselves being put up for adoption....
You say "buy crap, play crap"... Which is a term of measure for a guitar. With that I say: How does a child know how far a mile is until he actually walks one. If you have nothing to gauge a guitars quality on you have no idea what is a good guitar and a bad one. And they offer the cheapest avenue to learn the basics and to test the treacherous waters of learning the instrument. Because lets face it. Not everyone that wants to learn to play guitar follows through on it. Having a 400 dollar guitar sitting in the closet is a very poor investment.... And they're more likely to just sell the guitar than keep playing. With a cheap guitar they're more likely to keep it around and maybe they'll come back to it later on.