Once they were called civil servants, but after the barrage of taxpayer-funded bailouts, they may be more properly seen as “civil masters.”

David Brooks, writing today in the New York Times, aptly describes the phenomenon ^[1] without–in typically Brooksian fashion–making any harsh judgments about it:

For those who don’t know, Ward Three is a section of Northwest Washington, D.C., where many Democratic staffers, regulators, journalists, lawyers, Obama aides and senior civil servants live. Thanks to recent and coming bailouts and interventions, the people in Ward Three run the banks and many major industries. Through this power, they get to insert themselves into the intricacies of upscale life, influencing when private jets can be flown, when friends can lend each other their limousines and at what golf resorts corporate learning retreats can be held.

(snip)

Nonetheless, many people in Ward Three do have certain resentments toward those with means, which those of you in the decamillionaire-to-billionaire wealth brackets should be aware of.

In the first place, many people in Ward Three suffer from Sublimated Liquidity Rage. As lawyers, TV producers and senior civil servants, they make decent salaries, but 60 percent of their disposable income goes to private school tuition and study abroad trips. They have little left over to spend on themselves, which generates deep and unacknowledged self-pity.

Second, they suffer from what has been called Status-Income Disequilibrium. At work they are flattered and feared. But they still have to go home and clean out the gutters because they can’t afford full-time household help.

Third, they suffer the status rivalries endemic to the upper-middle class. As law school grads, they resent B-school grads. As Washingtonians, they resent New Yorkers. As policy wonks, they resent people with good bone structure.

In short, people in Ward Three disdain three things: cleavage, hunting and dumb people who are richer than they are. Rich people have to learn to adapt to the new power structure if they hope to survive.

Brooks should also acknowledge that pockets of what I will call “Ward 3 mentality” exists in Cambridge, Mass., Manhattan, Los Angeles’ West Side and the suburbs of many university towns from Berkley and Boulder to Madison and Ithaca. The resentful hate the “greedy”–and that animus is the source of too much of our politics today. “Hope and change” is simply the sweet coating on this bitter pill.

Also does it make sense to put people who have never run a profitable enterprise in charge of some the world’s largest and (until recently) profitable businesses? Would you promote an obscure director to CEO overnight? Isn’t management experience important?

And don’t tell me that they were on the committee that ran their law firm or supervised the activities of a non-profit or government agency. That experience doesn’t count for much. How many non-profits fail to make money-saving improvements (like outsourcing payroll or upgrading IT) because they “can’t afford it”? And, more importantly, how many lawyers understand the flexibility needed to strike profitable deals? How many bean counters know that a cheaper, ugly car is less profitable than a more expensive, stylish one?

Entrepreneurs, like virtuosos and divas, need a lot of understanding and forbearance in order to dazzle and delight us with their contributions. Stubbornly stamping your foot and insisting that they should act like the rest of the drab majority is the best way to drive them from the country or into the arms of laziness. Either way, the country is made poorer. (This is why Silicon Valley, Lincoln Center, Wall Street and Hollywood tolerate eccentricity; they know that normal people are not outsize wealth producers and the creative people are, to some extent, crazy.) In short, if the guy who just made you a million dollars spends his share on a golden commode and a polka-dot suit, the smart executive would not scold him for extravagance but remind him that if he wants to buy more of these he will need more million-dollar deals next year. Instead, the Ward 3 scolds will point out that if the company didn’t give him the money for golden commodes and polka-dot suits, it would be even more profitable, produce more jobs et cetera. Of course, the mercurial creative will produce less without his access to eccentric rewards.

The Ward 3 mentality is essentially a middle-management outlook, perfect for keeping the boss happy by filling in all of the right boxes and keeping the junior staff in line. Leaders require additional skills. Or as my non-rich grandfather would say: “If they are so smart, why aren’t they rich?”

Unfortunately, our new civil masters are not smart enough to enrich the rest of us either. Expect a blizzard of new regulations that accelerate the downturn followed by lots of puzzled soul-searching in the media about 18 months from now: What went wrong?

Forget all that talk about parallels to the Great Depression. Ward 3 has run the economy once before. The re-run of the late 1970s has begun.