And he called Elves the embodiment of good. He's saying that what he considers good inevitably leads to evil.
This is more of the color coded morality. Elves are the 'Good' race, but as we saw when things went sour.. Good organizations failed, and fell to evil.
Before the Cataclysm, none of them would have passes a review.
Istar lost its power, because they were no longer good.
Knights, corrupt, haughty, Lord Soth.
Elves. Had resorted to enslaving their own.
These were all BEFORE bastions of good, but had fallen from grace. It's a story, biblical, in its age.
I hope that explains my position, I'm not saying it's the only view, but clearly there is room for interpretation here.