Think about the number of people you know. Now ask yourself how many of them you really know.
Sociologists and neurologists and similar scholars have proposed a concept which is formally known as Dunbar's Number, but it is more likely to be known to the non-scientists of the Internet as "the Monkeysphere", a name bestowed upon it by Cracked.com which has the advantage of being catchy and easy to comprehend. The Monkeysphere is the collection of your fellow monkeys, that is to say human beings, which you can fully conceptualize as people. Your immediate family, your close friends, your coworkers, service providers with which you interact on a very regular basis (such as the barber who cuts your hair every week, or the barista at a coffee shop you visit roughly every other day), and service providers you see more rarely but have a greater sense of trust and respect toward (such as a doctor or a career counselor). It is your own little social network, and everyone within it is a real person to you; you can reasonably well understand their personality, you feel empathy toward their concerns, and you can remember how they relate to one another.
Outside of this group, you simply don't have the mental processing power required to remember any more people in such detail, and so you begin to generalize. People are reduced in your mind to faceless functionaries; you can't bring yourself to care about them, though you can easily resent them - they in essence become objects or animals to you, something to "deal with" rather than "feel for". You tend to make assumptions about them rather than try to understand the truth, because they aren't weighted in your mind as being important enough to bother genuinely learning about. It's like the difference between something you think is true because you saw an unsourced claim, and something that you've extensively researched; you know your friends because you cared enough to invest time learning how they really feel, while someone you're not attached to as a person, you can simply assume they probably fit whatever stereotype is closest to how they appear to be, and not bother to try any harder than that.
Various numbers have been proposed for Dunbar's Number; the most often quoted figure is 150. It may vary from person to person, but it may also be determined absolutely by human brain size; this isn't yet well-understood. Regardless of how big the number is, however, it almost certainly is far less than the number of people modern society forces us to deal with. And when your "monkeysphere" excludes people that society expects you to deal with, bad things happen. You assume the police are government-sanctioned thugs and react with discourtesy to them, increasing their burnout toward their job and making it more likely that they'll turn out to be exactly what you think they are. This happens on every stratum of society, and is quite inevitable, because we're simply being asked to keep track of more people than we possibly can.
A more sensible system would be for all government to be localized, consisting of interlocking "monkeyspheres" where every person has a network of friends who each have their own network of friends, and nobody ever tries to govern outside their own little zone. If we go with the number 150, then maybe a doctor can have about 50 patients, and he knows all of them as well as he knows his own family, cares just as much about their health and would never cut corners at their expense just to turn a profit. His monkeysphere would include the owner of his building, and the landlord's monkeysphere would include the city planner who makes sure the building isn't a fire hazard, but there wouldn't be any governmental links that aren't based on this very tight association. This closely personal touch would prevent people from making decisions about a situation they didn't understand, and would forbid them from dehumanizing people that they have to interact with.
Now the question becomes, how do you create and enforce a system like that?