I theory you are right. But can you say of a king that he understands his people? Or of a president that he fully understands the country he is ruling? There is a difference between knowing, and understanding/acknowledging. And sometimes, people don't get it, even though it would be in their best interest to understand things.

In this case, I think the people at the top are in an "ivory tower" of righteousness. They know what's going on (you're right on that point), but they don't understand it, that's why they can't act pragmatically on it.