EVERY time Peter Bounds pushes his way through the doors of Liverpool's Victorian-era municipal building he gets a sharp reminder that he serves a community where political passions can run notoriously high.Placard-toting trade unionists greet the newly-appointed chief executive of the city which produced the Beatles, used to be the hub of Britain's commerce with North America, and until its sharp decline in the 1960s was one of the world's great ports. They ritually complain to him about cuts ordered in the council's over-bloated labor force, and mutter "hatchet man." In an interview Mr. Bounds shrugs off the doorstep pickets as "a symptom of a much larger problem." The heart of that problem is that Liverpool has suffered from prolonged political turmoil and economic decline. Unemployment is 19 percent city-wide and over 30 percent in some areas. But the burly 46-year-old lawyer who moved into the executive hot seat early this year, after an 18-month vacancy, believes Liverpool is fighting back. He says the years are past when members of the Trotskyite Militant Tendency gained control of the city's government in 1983 and went on a four-year spending spree that took it to the brink of financial collapse. "We still have an image problem largely as a result of that period," Bounds concedes, "but I think we have turned the corner." There are plenty of other places around the world where economic stagnation and large-scale unemployment have combined to produce massive urban decay. But Liverpool has faced two unique problems. As its port declined, it had few major local industries to fall back on. Car assembly plants that might have revived the local economy were closed down in the late 1970s and early 1980s. This swelled unemployment and gave extremists a chance to exploit grievances. Harry Rimmer, moderate Labour leader of Liverpool Council, describes Militant Tendency as "a revolutionary organization with a vested interest in chaos." Since losing their grip on the city council in 1987, Militant members have been charged in the courts with fraud. Their group's rule left Liverpool with a debt of 800 million pounds ($1.34 billion) and nearly 6,000 council-owned houses empty and unrepaired. Many Militant Tendency supporters defend their record. "I have no regrets," says Militant organizer Richard Venton. "Liverpool could still be the graveyard of capitalism and the birthplace of socialism." Hugh Parkman, chairman of an engineering group involved in several Liverpool projects, agrees that there is an image problem. But he maintains that too close a focus on politics distorts what had begun to happen in the city. Mr. Parkman's office is in the famed Cunard building, above the docks where, in the 19th century, half of Britain's external trade was handled and where proud ocean liners once tied up by the dozens. "Albert Dock, which our company has helped to rejuvenate, doesn't see many big ships nowadays, but it is visited by 5 million tourists a year," Parkman says. "They come to see such things as a permanent Beatles exhibition, to visit the new Tate Gallery, and the Maritime Museum, and to shop in attractive boutiques. The entire scene is being transformed." Out across the city at Wavertree Technology Park 37 companies have established themselves on the site in the last eight years, creating 1,600 jobs and opening up a new range of industrial activity. Tony Partington, an executive with a high-tech nutrition company, says: "At first nobody wanted to know about this place. Now they are queuing to come here. When people talk to me about the Toxteth riots 10 years ago, I talk to them about Wavertree now." Mention of racial violence in the dilapidated suburb of Toxteth, where tear gas was first used in England, leads back inevitably to Liverpool politics and the long, hard slog that began when the Labour Party denounced Militant Tendency in the mid-1980s and urged 'Liverpudlians' to vote for moderate politicians. Richard Evans of the Centre for Urban Studies at Liverpool University says the city and the Merseyside region around it "face a range of economic problems as severe as any in Western Europe." But he is hopeful that with improved leadership it will be possible to stage a recovery. The list of future industrial projects is growing. "Feasibility studies for an electricity-generating tidal barrage across the Mersey River are under way," he says. "There is a project to expand Liverpool airport, which currently handles half a million passengers a year, to be able to take 40 million by the year 2005." For Peter Bounds such ideas, though encouraging, are for the longer-term. He did not dissent from a trade union leader's reported assertion that "Liverpool is a company town, and that the council, the city's largest employer with 29,000 workers, is the company." "Our chief priority has to be to get the city finances back in order," Bounds says. "We have to get our labour force down in size so that we can come to grips with our debts." Liverpool Council's current political mix puts a premium on cooperation. The Labour Party is the largest group but lacks a clear majority. It governs with the support of Liberal Democrats. Militant has been pushed to the fringe. Mike Storey, leader of the Liberal Democrats, says: "These days we have to find consensus where we can." It is all a far cry from the years of Militant's ascendancy. Last March the Liberal Democrats and Labour agreed on eliminating 1,000 jobs, saving to the council 20 million pounds ($33.6 million) a year. "That," said Bounds, "is a good start."