For decades, America’s economics and business elites have been confidently assuring their countrymen that the alarming decline of the U.S. manufacturing sector was nothing to worry about. Dying industries and mass layoffs represented a great human tragedy, of course, and manufacturing boasted a long, distinguished history, but in the grander scheme of things all that misery and dislocation was for the best. The demise of manufacturing simply heralded the rise of alternatives better suited to modern circumstances—chiefly, the spectacular progress of information technologies and the impressive advances in the psychology and mathematics of finance.

American leaders, the Establishment insisted,…