TWO CENTURIES after rising up from the desert wastes, Los Angeles stands on the verge of becoming the nation's dominant metropolis. Long dismissed as tinsel town, a city of silly illusions, it has now seized the political, economic and cultural initiative away from the declining cities of the East and Midwest. It is the American city closest to the sources of national power, the prime arbiter of the mass culture and the nerve center of the country's expanding high-technology industries.

"The eastern media made a mistake in not taking Reagan seriously because he's an actor from Southern California. They just don't understand how people around the country think these days," observed William J. Casey, Reagan's campaign chairman and a New Yorker. "California right now is seen as having a more sophisticated, more advanced society than anyone else. It is very successful, and that's been a very good influence for us to be associated with."

While 1980 markes the third victory by a Southern Californian in the last four presidential elections, Los Angeles' ascendancy does not stem primarily from the successes of Ronald Reagan and Richard Nixon. More important has been the city's emergence over the past decade as America's center for economic and cultural innovation.

While the steel and auto industries of great eastern and midwestern cities declined through the 1970s, Los Angeles' high-technology and service-oriented economy prospered. At the same time the Hollywood-based entertainment industry underwent an unprecedented explosion. With the average American family now watching some six hours of television daily, it is not surprising to find the Los Angeles celebrity culture heavily influencing the rest of the nation.

During the election campaign President Carter attacked Reagan by raising the specter of Southern California hegemony. "I have a recurring nightmare -- and that is the Hollywoodizing of Washington," Carter told a Democratic fundraiser in the nation's capital Sept. 30. "In it I see every bill signing on the South Lawn taking place at night with huge spotlights, and I see Pennsylvania Avenue turning into the Avenue of the Stars, and I see foreign dignitaries putting their boot prints into cement on the South Lawn and I see the most important news personality of America is Rona Barrett -- and then I wake up."

Unfortunately for Carter, his attempts to brand Reagan as a Hollywood flake failed to impress the voters -- who, after all, are the same people watching all that television. "People really distrust those Washington politicians because they always somehow come on as 'them,' something different from the people," observed one Hollywood television executive, himself anti-Reagan. "But it's different for Reagan and the other movie people. People know all about them, they read about them, about their personal lives all the time. To the people out there, movie celebrities are part of 'us'."

But far more crucial than Hollywood to Los Angeles' rapid ascendency has been Southern California's massive industrial development, first sparked by the military buildup during and after World War II. Movie studios might provide jobs for a few thousand, but the expansion of aircraft, missile and electronics factories provided hundreds of thousands of jobs for new Los Angeles residents. In the 15 years after the onset of World War II the Los Angeles area population grew from 3 million to 5.5 million, a staggering 83 percent increase.

The area today is an industrial powerhouse that provides more manufacturing jobs than any other metropolitan area, including greater New York. The economy of the "60-mile circle" around downtown Los Angeles exceeds $110 billion; if taken as a country, it would rank 12th in terms of gross national product and its per capita income would put it fourth, behind oil-rich Kuwait, Qatar and Saudi Arabia.

Aerospace remains the largest cog in the Los Angeles area industrial machine, providing some 200,000 jobs. While the civilian end of the aerospace industry -- communications satellites, solar cells, corporate jets, gas lasers -- has expanded, federal dollars still play a key role. In 1978 California received more than $10 billion in defense contracts, the most of any state, while capturing more than 40 percent of prime NASA contracts.

With all this, the region has lured more skilled technical and scientific personnel than any other metropolitan area. Between 1945 and 1975, Southern California's population of professional, scientific and technical workers exploded by more than 200 percent, four times the rate of the eastern and midwestern regions. The arsenal of America has also become its center of technological innovation.

"The fruits and nuts are important, but what keeps California going are the military and electronics," remarks Larry Horwitz, vice president for regional economics in Bala Cyn Wyd, Pa., for Chase Econometrics, a subsidiary of Chase Manhattan Bank. "It's not so much a question of 'As goes the United States, so goes California.' Actually it's the other way around. They are on the cutting edge of technology."

Recent increases in Pentagon spending have further bolstered Los Angeles-based aerospace, boosting industry employment by a third since 1976. With long-term contracts for such projects as the space shuttle, the F-18 and F5G fighters, the TOW anti-tank missile, military satellites and new classified Air Force radar systems, the biggest problem for many Los Angeles aerospace companies is finding enough qualified workers to meet production schedules. At a time when some 200,000 auto workers are out of jobs, companies like Hughes Aircraft, Lockheed and Douglas Aircraft have been sending recruiting teams to depressed regions to find workers.

Throughout the recent recession Los Angeles has kept its unemployment rate well below the national averages despite a continuing in-migration from abroad and from other parts of the country. The June unemployment rate was a full point lower than the national average. "The country's going down the tubes, but we're doing fine," says Tom Lieser, economist for the Los Angeles-based Security Pacific National Bank. "People think we're a bunch of lazy flakes, but we work as hard as anyone. While New York has been losing industries, we've been increasing ours dramatically."

During the '70s, the Los Angeles economy streaked way ahead of the economics of its two great metropolitan competitors, New York and Chicago. While the tristate New York region lost a half million jobs and Chicago's area remained fairly stagnant, Los Angeles' metropolitan area created nearly a million new jobs. The decade saw the Los Angeles area economy expand at a rate 40 percent higher than New York's and 50 percent above Chicago's.

With its 10 million people, the Los Angeles area, however, still ranks second in population to metropolitan New York's 16 million. But Los Angeles' population and economy are growing while New York remains, at best, stagnant.

Los Angeles' industrial ascendancy has even extended into such traditionally New York-dominated areas as the garment trade. Between 1970 and 1978, New York's famed garment industry lost more than 50,000 jobs while Los Angeles' booming apparel district added over 30,000 employees. Although still second to New York, Los Angeles has staked itself the position of the aggressive, fast-growing competitor.

"Los Angeles' garment district is oriented towards the big American leisure society. Your designers are inspired by a society which is on the cultural edge," says George Sternlieb, director of the Center for Urban Policy Research at New Jersey's Rutgers University. "Fashion used to come from the East to the West. Now it comes West to East. The future of fashion is in California."

Similarly, Southern California's economy is expanding into such eastern-oriented fields as publishing and finance. Publishing employment dropped 23 percent in New York between 1970 and 1978 while it increased 32 percent in Los Angeles. Even in financial services, the backbone of the New York economy, there was an almost 8 percent drop in employment during the '70s in Gotham while the Los Angeles area's employment in this field rose over 23 percent.

"I don't think there's any question now that New York simply isn't the dominant city," concludes Andy Moody, director of metropolitan forecasting for Chase Econometrics. "The whole point is there's a shift away from New York and to Los Angeles. In employment and income Los Angeles is becoming the equal of New York."

This trend should continue through this decade, according to Chase projections. Personal income growth in Los Angeles during the '80s, they predict, will be almost three times that of New York. Manufacturing is expected to continue increasing in Southern California while the downward spipral will still dog the New York region.

Much of Los Angeles' recent prosperity stems from the luck of the geographic draw. While vulnerable to the energy crisis, Angelenos have been comforted by low winter heating bills and large nearby oil fields. With much of the oil production concentrated around Los Angeles, California last year turned out nearly 1 million barrels of oil daily, putting it in the top five oil-producing states. In addition, neighboring Kern County, just 100 miles northeast of downtown Los Angeles, has one of the country's largest field of untapped "heavy oil," estimated to contain as much as 20 billion barrels -- equivalent to known Alaska reserves.

Perhaps even more important, Los Angeles, as the great metropolis of the Southwest, expects to benefit enormously from the development of energy resources in Mexico and the Rocky Mountain states. Just this month, Southern California Edison officials signed an agreement with Mexico to purchase Mexican geothermal power. At the same time the Los Angeles-based utility is pushing the construction of large power plants at Warner Valley, near Utah's Zion National Park, and the Allen Power Project near Las Vegas, both using coal mined in scenic southeastern Utah. The city-owned Los Angeles Department of Water and Power is expected to begin construction soon on yet another Utah coal-fired electrical generating plant, the $3 billion Intermountain Power Project.

"They're going to take . . . the coal . . . to pop toast in Santa Monica," one California state official recently said. "They don't need all that power in Utah."

Los Angeles also benefits tremendously from its location on the Pacific, making it a prime conduit for trade with the fast-growing economies of Asia, notably Japan, South Korea, Taiwan and, increasingly, the People's Republic of China. Since 1973, the value of imports and exports passing through Los Angeles have grown a full 33 percent faster than in New York.

Although Los Angeles lacks the fine natural harbor of a New York or San Francisco, the city's man-made port has been expanding rapidly to meet increasing traffic. While the tonnage passing through New York's port facilities has actually declined since 1974, Los Angeles, its docks bulging with Japanese cars, Taiwanese televisions, Los Angeles-made airplanes and California cotton, has experienced a nearly 50 percent increase. Currently undergoing a large-scale dredging project, the combined ports of Los Angeles and Long Beach could overtake New York by the year 2000, according to officials at the U.S. Army Corps of Engineers.

Not surprisingly, then, the Southern California business community today exudes the sort of irrepressible optimism -- even arrogance -- that once characterized their East Coast counterparts. For these men manifest destiny is no source of the white man's quilt but a goal yet to be achieved.

"We're going to go about our business and not listen to those big mouths back East," snarls Bob Kleist, director of planning for the Port of Los Angeles. "They're frightened of us. They've had it their way for 150 years and now it's changing. We're taking over as the major center -- we're not just tinsel town anymore."

Bravado, occasionally backed up by ruthless action, has long been a trademark of the Los Angeles business community. When John Huston portrayed the omniverous, amoral Noah Cross, the aged power-monger in Roman Polanski's movie "Chinatown," he recreated the essence of many of the men who built the Los Angeles metropolis out of the desert wastes.

Perhaps more than any American city, Los Angeles is the product of the human will, of men possessed by a driving imperial vision of greatness. Lacking a natural harbor, the city fathers dredged one from the unpromising San Pedro mudflats, 18 miles from downtown Los Angesles. Needing electrical power, Los Angeles political and business leadership pressured Congress to build the monstrous Hoover Dam. Following the established civic pattern, local executives, such as Occidental Petroleum's Armand Hammer, are leading the drive to mine the Rocky Mountains for the benefit of greater Los Angeles.

But these manifestations of Los Angeles' imperial reach pale compared to the city's relentless drive for water. By the turn of the century Los Angeles business leaders realized that limited local water supplies could accommodate less than a million people. Led by the founder of the Los Angeles Times empire, Gen. Harrison Gray Otis, the city purchased (some say swindled) the water rights from farmers in the remote Owens Valley, 300 miles to the north. Today, the once verdent Owens Valley, drained to meet Los Angeles' growing thirst, is little more than an arid wasteland.

As Southern California grew, other watersheds, including the Colorado River and Northern California's Feather River, have been tapped. Yet again this year another massive water project, the $5 billion Peripheral Canal, was passed for Los Angeles' benefit by the state legislature over the strenuous objections of outraged and outnumbered Northern Californians.

"The history of this area is one of overcoming tremendous obstacles," observes Security Pacific's Lieser. "Look at the water or energy problems and how we overcome that. This place just can't stop growing no matter what. This is fantasy land, and nothing will be able to put an end to it."

The rigors of empire-building have forged a toughminded Los Angeles business leadership that eschews the liberalism not uncommon among eastern corporate executives. Fiercely nationalistic and unabashedly capitalist in outlook, these men have furthered their goals by supporting like-minded politicians like Richard Nixon and Ronald Reagan.

"We've had enough of 'What's mine is mine and what's yours is mine," says one high-ranking official at Fluor Corp, the Orange County-based global construction and engineering company long supportive of both Nixon and Reagan. "That's what's been going on for the last 50 years. We should go back to 'What's mine is mine and what's yours is yours. And if you step over the line, I'll blow your brains out.' That's the western way."

While usually less blood-curdling in the rhetoric, those closest to President-elect Reagan embrace this traditional Southern California brand of no-holds-barred free enterprise. Virtually every member of Reagan's circle of intimate friends come from the conservative Los Angeles business community, including Dart and Kraft Industries chairman Justin Dart, television producer Jack Wrather, developer William Wilson, supermarket executive Ted Cummings, attorney William French Smith and Diner's Club founder Al Bloomingdale. Like their friend Reagan, they approach national power from the vantage point of gilded neighborhoods, spacious homes and pastel-shaded living rooms, a slice of Southern California paradise which they zealously seek to defend from the Washington tax-collectors and regulators.

"What Ronnie and I really believe in is the free market. We don't like the feeling of being controlled by the government," asserts a two-fisted Al Bloomingdale. "This whole goddam country is based on the business community. Those guys who attack big business, those Naders, are full of it. cBusiness is right 99 percent of the time."

Los Angeles' rising political power has also been bolstered by the increasing importance of Hollywood in the electoral process, whether for liberals or conservatives. "Successful entertainers have built-in national constituencies. They bring in their followers when they endorse candidates," maintains Gary Davis, Gov. Jerry Brown's chief of staff. "It's a lot easier than taking money from special interest groups. And, I'll tell you, Jane Fonda and Carrol O'Conner have much bigger followings than most of those guys."

The increasing credibility of Hollywood in national politics is one reflection of how pervasive Los Angeles' culture influence has become over the last decade. In the past, the New York and Boston-based publishing industry provided a last bastion for the East Coast word-oriented culture, but now even that proud edifice is beginning to crack. East Coast hardback publishers find themselves compelled to print a seemingly endless stream of Hollywood biographies to bolster their sagging sales. Among the nation's top 15 nonfiction bestsellers in recent weeks, three or four have been written about or by entertainment industry personalities.

Perhaps even more disturbing, many publishers today have chosen to surrender to the Southern California hegemony by tailoring their products to the demands of Hollywood studios. "We are the software of the movie and television medium," Simon and Shuster president Richard Snyder recently told The New Yorker magazine. For publishers with their eye on the big money, a movie or TV "tie-in" has become more important than the literary property itself.

Sometimes New York or Boston publishers even hire readers from the movie studios to decide which books they should acquire. "If I like a book but my reader doesn't think it will make a movie, we're generally not interested in buying it," admitted a publishing executive from a major East Coast house recently.

At present, the chances of an East Coast political, economic, or cultural comeback appear rather dim. Barring a natural catastrophe, we have already witnessed the end of 200 years of national domination by the cities of the East. We are in a new epoch, centered in the sprawling metropolis of Los Angeles.

"I don't think anything's going to stop our ride," one prominent Los Angeles banker says, looking out over the jumble of construction sites outside his high-rise window. "Everything's breaking in our favor, and the future looks grand -- except, of course, for a 30-foot slip in the San Andreas fault."