A while back, when I worked in the South Bay area of Los Angeles, I was struck by an odd juxtaposition in the businesses I drove past on my way to work.  The overwhelming majority of the companies were aerospace and defense, but in the middle of everything was Mattel Toys.

“What an economy,” I thought.  “Death and diversion.”

Then I realized that when all the movie studios and other entertainment companies in Southern California were factored in, this was an apt description for the metropolitan area at large.

In the years that have elapsed since then, a lot of the “death industry” has been removed from our mix, with sustained and often wrenching contractions in the area’s defense industries.  A number of other industries have also faded away, such as financial services, leaving the nation’s most populous state without a single major bank of its own.

Entertainment, though, is still going strong.  Burbank may have lost Lockheed, but it’s gained a number of new entertainment-industry campuses and expansions.  Our drift toward an imagic economy here in Southern California is therefore hard not to notice.

“Imagic,” by the way, is a term I felt compelled to coin when I couldn’t find anything else that adequately describes and illuminates a set of traits shared by toys, movies, advertising, corporate annual reports, and a variety of other artifacts prevalent in contemporary society. These are at root visual, verbal, or numeric images that may appear to be of real things, but often aren’t.  They’re also all human creations—and as such, products of the human imagination. And more noteworthy still, their ability to support beliefs that are at variance with objective reality, as well as with normal principles of causality and logic, has propelled them to the pinnacle of our era’s delight in fresh new forms of magic.

Lately I've come to the further realization that what's happening in California can be considered representative of what's happening in the country at large.

That’s not just because we tend to be ahead of the curve on trends (substantive and silly alike), or even because more people live and work here than in any other state.  Take a look at what America exports to the rest of the world:  in no area is our global stature more unchallenged than in entertainment and pop culture.  We dominate the world with Little Mermaids and R2D2s, rappers and Queen Bees, trendy new restaurants and clothes that all the kids at school have got to have.

This imagic economy also has a substantial grip on more traditional businesses.  To give just one small example, the licensing and merchandising of characters from animated movies has made major inroads into the marketing of children’s pajamas and lunch boxes and a host of other kid-oriented products.

More traditional businesses are also becoming more imagic on their own, without any prodding from the entertainment industry.  What are we really buying, when we pay top dollar to get a product emblazoned with the Nike “swoosh?” Isn’t this fundamentally an image that we’re choosing?

Nike shoes are also representative of another widespread trend, in which purportedly American products are actually made somewhere else in the world, and all that's really handled in this country is the marketing and branding—i.e., the imagic dimension.

In fact, the most prestigious knowledge leaders in business are all quick to point out that in today’s environment, the most important asset any business can have is a brand.  This speaks volumes about the nature of the contemporary economic milieu.  What counts most is no longer anything tangible, like an oil well or a mine or a bulldozer, or even an entire state-of-the-art automotive assembly plant.  The most significant form of economic value today is an imagic item.

Consumers are not the only players on the economic field who are more concerned with imagic factors than with substantive ones.  Think of all the money that was invested in Enron, when all it was ultimately selling was an image—a set of perceptions, based on lofty pronunciamenti about new economic directions, plus an artfully managed spectacle of so-called “results” that turned out to be nothing more than an accounting flimflam.

Moreover, as we found in the wake of its collapse, Enron was far from the only large, apparently prosperous company whose foundation was imagic—i.e., just a carefully cultivated set of perceptions involving creative fun with numbers.  Empty management razzle-dazzle for the entertainment of Wall Street had already been making gazillionaires of its more adept practitioners for more than a decade.

Consider the case of Albert J. Dunlap, long considered a whiz at corporate turnarounds for his effects on corporate market value as CEO of the Lily-Tulip paper cup company, beginning in 1983; then Scott Paper in 1994; and then Sunbeam in 1997.  He was eventually exposed as just using the merciless job cuts that had earned him the nickname “Chainsaw Al” as a cover for at-best questionable accounting gimmicks that were the real source of the impressive-looking numbers in his corporate reports.

When you get right down to it, what does any stock price reflect today, other than perceptions about how other people feel about the stock, and how much they might therefore be willing to pay for it?  Contemporary stock prices certainly don't have much to do with the classic expectation of being paid a dividend.  And when we reach the point where what we're mainly buying is “buzz,”  it's time to acknowledge that the imagic dimension of our economy is every bit as predominant on Wall Street as it is in a shopping mall or supermarket—and every bit as capable of being artfully manipulated.

For an American, what’s especially disturbing is the difficulty of finding an area in which we lead the world these days that is not ultimately imagic in nature.

Computers and high technology might seem at first glance to be in this category, but the impression tends to wilt a bit under closer scrutiny.  We don’t create the leading-edge semiconductors anymore—Taiwan does.  And while Apple still does sell a lot of phones, laptops, and other personal devices, what really sets them apart isn’t actually their technology, but the way they present it.  Their software isn’t always the easiest to use (I do a lot of muttering about where did they hide the controls), but it’s presented in such a smooth, sleek way that it appears downright wondrous—occupying a space in the popular imagination somewhere between science fiction and magic.

America also still leads the world in high finance.  But how substantial is that industry? Perhaps its most significant invention in recent decades was mortgage-backed securities—an esoteric creation that almost nobody really understood, but whose innovative brilliance was universally admired (until it came within a hair’s breadth of imploding the global financial system.

Of course, it may not look this way to everybody right at the moment.  American business is still a bit full of itself, boasting wherever it can of what it can teach the rest of the world about increased productivity under deregulation, open markets, and so forth.

But what if our edge turns out to be mainly just a matter of being more at home in the imagic state into which all economies are drifting?  It could well be that we’re just less “encumbered” in our thinking by an urge to have business decisions make old-style literal, objective sense.

It’s more than a little unsettling to think of the comeuppance that may ultimately await these habits of mind.  But it may be scarier still to contemplate a world in which this kind of disregard for objective sensibility does not ultimately end up being corrected.