Santa Monica: where liberal ideology meets the sea

''The revolution,'' Mao Tse-tung once wrote, ''is not a tea party.'' Neither is running a grass-roots city government - even in the New Left mecca of Santa Monica, Calif.

''The toughest problem we face is that we raised people's expectations of what they could expect from city government,'' Mayor Ruth Yannatta Goldway says. ''People in our city are participating 10 times more than ever before. But (they have to realize) that we can't do everything.''

Ms. Goldway heads the coalition of liberal politicians who, in one of this decade's most publicized city elections, wrested control of the seaside community in 1981.

Since then, the city has enacted a wide range of reforms designed to make business and industry more responsive to public needs. It has vigorously defended one of the nation's toughest rent-control laws, upgraded enforcement of anti-housing-discrimination ordinances, and, in return for building permits, coaxed developers into providing the town with new housing units, child-care centers, and parks.

The reforms have been hailed by the town's large tenant population as ''progressive,'' and castigated by the business community for being ''ideological, antiprofit, and anti-private property.'' Still, many of the council's measures have served as models for other midsized towns attempting to deal with problems of recession and uncontrolled growth.

Ms. Goldway says the town's development agreements, which require builders to replace housing units displaced by new commercial units, have attracted nationwide attention from universities, professional planners, and city governments.

Because a liberal majority on the City Council is ensured through 1985, Ms. Goldway's opponents are trying to influence city policy through other means, including:

* Tendering an April ballot initiative that would allow tenants to buy their apartments if 60 percent of them agree to ask the owner to convert the units into condominiums. Proponents tout the measure as an equitable answer to the needs of the town's middle-class residents. The liberals and their main political constituency, Santa Monicans for Renters' Rights, view it as ''a way to reintroduce speculation into the Santa Monica housing market,'' council member Dennis Zane says. ''They want to effect a long-term demographic shift in the population, where lower and moderate income people will be driven out.''

* Introducing lawsuits against the city through conservative, nonprofit legal foundations. Contending that the city's landlords represent a class of individuals denied due process of law under the 14th Amendment, the newly formed Southern California Legal Foundation has slapped a $20 million civil-rights lawsuit on the City Council for its prosecution of two landlords accused of housing discrimination.

''The charge is nonsense,'' says city attorney Robert Meyers, who points out that of the 11,000 lawsuits filed last year, only 10 were against landlords.

* Holding rental units off the market. ACTION, a landlords' group, has urged its members to rent only to felons and foreigners, who cannot vote in city elections. At least 100 units are currently unavailable to renters because of ACTION, Mr. Zane says.

But are the fears of the business community justified? Have council actions scared away many developers?

''Unfortunately, no,'' Zane says. More than $164 million in new building permits have been issued during the liberal regime, he says.

Beyond the day-to-day actions of the council, its members' commitment to the ideals of ''economic democracy'' - loosely defined as using city clout to put private wealth to work for the people - sparks the most debate.

''It's a nasty business down here,'' says David Shell, director of the Southern California Legal Foundation. ''The people running our town do not believe in private property.''

Counters Zane: ''The City Council's view about development is that it is more than brick and mortar. Development determines the livability of a city, the economic future of a city - essentially the whole future of a city. We seek to assure that development contributes to the city as a whole, and not just to the ambitions of developers.''