The first problem is comparing privacy from your family members to society as a whole. Sorry, but there is little power to be gained from peeking through the window of your older brother. And it will definitely not affect anybody else on your block. Now, if somebody were to drive down the street with a camera, film everybody and everything and put it on the Internet, that would be a whole different story. Google tried, and they had to blur faces, lower their cameras or stop altogether in different countries. The key difference is the scale of the operation, and number of people affected.
The second problem with your argument, is comparing police, state and government surveillance with private data collection. You might think Google, Microsoft, Facebook are evil, and should not hold your private data. You're probably right. However, none of these companies will kick down your door and shoot your dog. The very purpose of government surveillance is to retain power and control. That has always been the case, and the Internet and computers didn't change it. It has just made the rulers' job so much easier.
The beauty of total government surveillance is that it doesn't have to be total in order to achieve its goal. It is enough if most people merely believe they are watched most of the time, just like you describe. We start to self-censor. We'll be more careful about what we write, what we criticize, who we associate with. It fences our thoughts and ideas, and limits our ability to seek alternatives, which is precisely its purpose. The opposite is not privacy, it is freedom and liberty.