What is happening here is ugly but not unexpected. The mayoral race between Democrat Harold Washington and Republican Bernard E. Epton has brought to the surface, in naked form, the racial tensions that have always been here.

As the April 12 voting nears, little is being said by either man about the problems of the city or his approach to solving them. The other day Epton, an obscure 14-year veteran of the state legislature, spent his entire formal speech at Loyola University raking over Washington's record of evading bills and taxes. At the start of the questions, when a student asked, "Mr. Epton, please tell us something about yourself," he seemed genuinely startled.

Later the same day, at a labor lunch, Washington spent most of his time arguing that President Reagan and the national GOP, working through the consulting firm of Bailey Deardourff, were responsible for one of the "slimiest, funkiest, low-life, scurrilous" campaigns ever conducted. He was equally noncommittal on his plans.

The Epton ads, urging Chicagoans to vote for the Republican "before it is too late," disturbed some Epton supporters as much as Washington's conviction for nonpayment of taxes and temporary disbarment bothered some Democrats.

But the public campaign is mild compared to what is going on out on the streets. A friend in a white, ethnic northwest-side ward was given an unsigned flyer by her assistant Democratic precinct captain. Among other things, it said: "Mayoral candidate Harold Washington throughout his campaign solicited votes from black audiences by referring to them as 'our people'. . . . He taught us a valuable lesson. . . . It is not a racist act to unite. . . . Harold Washington will surely represent his people if elected. Where will this leave our people? We have for years paid taxes to support his parasite constituency. Now they want it all."

The flier had a disclaimer saying it "is not sponsored by any political organization or candidate," but it pointedly concluded: "Remember, your Democratic primary vote does not mean you cannot vote for the other party in April."

At a newsstand, near where it was handed out, a sweet-faced young white girl, wearing an Epton button, said there was a simple reason why most of her Polish-American customers were voting for Epton: "They think if Washington wins, the blacks will take over the city." This ugly contest has important national implications for both the Democrats and Republicans. But for one who grew up in the Chicago area and went to college in this city, it is the unraveling of the city that is overwhelming.

This was supposedly "the city that works" during Mayor Richard J. Daley's long reign. But a native must acknowledge that this unraveling is not unexpected. All through the Daley years, when Chicago was held up for admiration as an example of a thriving metropolis, the system worked very differently for different people, and blacks got the short end of the stick.

Downtown businessmen and developers got friendly assessments, helpful federal grants and a freeway system that cut through neighborhoods to bring workers and customers downtown. The white neighborhoods got protection from black encroachment. And the blacks got what? They got lax administration of welfare programs, financed by federal, state and county funds--not city taxes. They got their share of patronage jobs, but few of great prominence.

On the things that really mattered, blacks were systematically robbed. They did not get real private-sector jobs in their neighborhoods, the kind that lead somewhere. On the contrary, their patronage jobs often kept them dependent on the goodwill of an absentee white ward boss. They did not get schools that educated their kids. On the contrary, under Daley, the Chicago schools became among the worst and most segregated in America.

After Daley's death, his successors proved inept even at maintaining his system for pacifying blacks. During the blizzard of 1979, Mayor Michael Bilandic dead-headed the elevated trains through black neighborhoods to pick up his white constituents. Black anger helped elect Jane Byrne. In 1982, Byrne refused even to let black politicians run the largely black public housing units. Black anger nominated Washington.

This is a city where anything you want--a job, a contract, a trash can for your home, books for your school, a cop to protect your business --depends on who you know in City Hall. When whites say that Washington's election would mean the blacks will "get it all," they are in effect acknowledging their guilty understanding that, in the past, blacks got next to nothing. They cannot believe that the dispossessed will be more generous than their longtime masters.

Like other areas that retained a colonial-style government far too long, Chicago has awakened to the possibility of revolution. And it is tearing the city apart.