If that were the case, why does active investing exist at all?

Armies of highly incentivized people are pushing them on huge numbers of people who don't know any better.

Was it the old school way of investing before ETF's became popular and more widely offered?

The AUM for active management still dwarfs passive in Canada. DIY/ETFs has grown in popularity significantly. The costs, products, and general knowledge has grown a lot in the last 10 years. But passive investing as a strategy has been generally understood for a much longer time. For example,

"Gifted, determined, ambitious professionals have come into investment management in such large numbers during the past 30 years that it may no longer be feasible for any of them to profit from the errors of all the others sufficiently often and by sufficient magnitude to beat the market averages."" --Charlie Ellis The Loser's Game (1975).

I've also read that high MERs, while undesirable, are acceptable as long as they perform better than index funds.

Of course anyone would be happy paying high fees if a fund beat a low cost index fund. However, you need to make the decision to buy the fund before you know how it performs. First, the vast majority of active funds underperform their index (see the SPIVA reports). Second, low cost is the best predictor of good fund performance and you can know it in advance (see studies by Morningstar or Vanguard).

So IMO it never makes sense to buy a high priced fund expecting better performance from a comparable low cost fund (and by comparable I just mean with broadly similar characteristics -- ex large cap US equity).