I agree with the problem - but disagree with the solution.
For me, Birthday parties should be smaller and with people who actually care about the birthday boy/girl. Friends, family, etc. People close to them.
What annoys me is the mass "lets invite everyone in the class!" type parties that are so common. Why? Why do you want so many people there, half of which don't care about your child? All it does is end up in a big expense, mound of gifts, and a whole lot of stress.
Is it just to make the child feel special? Or Jealousy because X had a huge party, so now I must give one to my little one? Or they won't feel special?
Personally it sets a bad example. Children should find that special warm feeling from being surrounded by people who love them, not because of the amount of people there.
Were everyone to go back to smaller more intimate parties, I think it would help solve the problem, without the need for joint events.