eyond Lake Vermilion, across from the Denvale West subdivision where Country Club Court and Golf Terrace and Park Haven all nestle comfortably along the Danville Country Club grounds, stands the last and greatest of the developments.

Chateau Estates, as the sign lettered in Old English script by the guardhouse proclaims, commands a direct view of the golf course and surrounding Illinois prairie. It was planned as the ultimate in Danville's executive living, in the area most favored by corporation managers of the Fortune 500 companies who comprise the city's business and social leadership, $250,000 homes set nicely apart on bulldozed earth.

Lush green lawns were put in, but now weeds grow among them. Houses were completed, but they sit unoccupied and unsold. Streets were paved, but no cars roll over them. Along the front, an imposing wrought-iron fence was erected between massive brick posts, but it secures only an expensive wasteland.

Chateau Estates, no less than Gatsby's mythical deserted mansion standing alone among the falling leaves after the dream of the 1920s was shattered, provides a metaphor for the 1980s. Here, the revolution of rising expectations -- America's insatiable hunger for more and better -- came a cropper.

Whether it is only a temporary setback on the road to success or something more permanent, no one in Danville knows. All that can be said for certain is that fear has replaced optimism in this city of 40,000 just west of the Indiana state line where the unemployment rate has been stuck in the double digits since December, 1979. There are no realistic prospects for immediate improvement.

Fear, and something even more disturbing: a gnawing sense that the Danvilles of America, dependent on the heavy industries such as foundries and truck assembly plants that provided so much national prosperity, are facing problems that threaten their economic survival. They can never be the same again. The basic makeup of this society is being transformed. As one city official said, the middle class is being eradicated here.

Lou Mervis, a wealthy businessman, registered Republican and civic leader referred to by some as "Mr. Danville," says, "I think for the first time businessmen I talk to are just not sure we're going to come out of this recession."

With almost one of five persons here out of work, everyone knows someone affected. Men with impeccable work records are being laid off. People with 18 years' seniority are unable to find jobs that pay enough to make mortgage payments.

The population declines. The younger workers leave. The older ones, trapped, are forced to accept once unacceptable conditions. Workers at one plant, for instance, have been told they will have to give up 50 percent of their benefits or the factory will be relocated in the South.

Many in Danville have lowered their expectations. Personnel people say they find job applicants who falsify academic credentials downward. College graduates, perhaps with post-graduate degrees, say they have graduated only from high school. They do not want to be considered overqualified for scarce factory work.

For Danville and other communities, that represents a dramatic shift. People are lowering their sights and accepting less rather than assuming they will go up and get more.

Danville, where Lincoln once practiced law, stands amid an area that could provide a perfect model for Ronald Reagan's America, one which overwhelmingly voted for the president two years ago in a burst of enthusiasm. Now economic conditions are affecting the way people think about the president.

"I think the Reagan policies have failed, and I don't think they will work in today's world," Mayor David S. Palmer says. "I just think his policies set this country back 25, 30 or 40 years."

Even some of Reagan's strongest supporters are critical of his economic policies and, interestingly, his calls for increased defense spending. Five days of interviews here turned up only one person, Bill Bounds, the Teamsters union chief and a power in Illinois politics, who unstintingly supports Reagan. More commonly, people say they hope Reagan does not run again.

That does not mean the Democrats will be able to capitalize on such discontent this fall. Unions are demoralized and fragmented, and many of their members have left. Some have made the trek south for the supposed benefits of the Sun Belt, only to return even more discouraged in their search for permanent work at wages that permit them to support their families and carry their home mortgages.

From these unemployed workers in their union halls and homes one senses more a feeling of frustration, fear and depression than anger. Union leaders, grimly trying to spark a major voter registration drive for the Nov. 2 elections, glumly concede they have only a slim chance of succeeding.

Conservative Republican Rep. Daniel B. Crane, who represents this area, will not do nearly as well as in his previous two races, but he is expected to win.

People seem completely preoccupied with their own pressing problems. They are not looking to political action as a remedy. More important, they are asking questions about the entire American future and how they fit into it. That, too, represents a change.

For years, Danville was cited as one of those quintessential midwestern communities where with pluck and industry one could make $1 million almost overnight. The Saturday Evening Post, that old Bible of small-town, middle-class American values, described Danville as a place where "You Can Still Do It." The "It," of course, meant the ability to start on a shoestring and amass a fortune, proving, the magazine said, how great are "the little man's chances for success in a free society."

That sort of talk is not heard now. An ominous sense of deterioration and despair is settling over this bastion of rock-ribbed Republican conservatism. Danville has gone through boom and bust many times, but not since the Great Depression has it endured such demoralizingly hard times.

Soup kitchens -- they are called by that chilling Depression term -- are being planned for the increasing numbers of unemployed citizens. Food handouts are growing in volume.

Two months ago, when a voluntary "food pantry" was opened, it served 10 to 15 people in a week. Now it serves 15 to 20 each day. Six months ago, the Vermilion County Citizens Action Committee, providing various services to the poor, almost never encountered anyone with no income. Now it averages six such persons daily.

The committee also compiled a lengthening list of truly frightening cases of persons without money, heat or food. For the first time, committee members see large numbers of persons whose utilities are being shut off for nonpayment.

"I'm afraid," committee director Otis Hillsman says. " . . . .How far will a man go to take care of the needs of his family?"

At the newly opened rescue shelter for transient people without a place to sleep, the Rev. Jerry Jones recalls Depression days when men, looking for a handout or a place to spend the night, would knock on his parents' back door. At the Family Service Bureau, Faye Cossairt, who has been doing social work here since 1955, says:

"We're seeing a big change in the men. When a man isn't able to support his family, in times past he always found some way. But we have seen increasing numbers of men who leave their manhood at the foot of the stairs when they come here for help. It's an attitude that expresses itself in all kinds of family problems.

"Men who never beat their wives before are doing so now. We see children with greater resentment of their parents. We see people without jobs with impeccable work records. They're scared to death. I've never seen this kind of fear before."

Two small signs of the way hard times affect the people and their community:

Danville added a 1 percent tax on liquor, and now, as the unemployment rate rises, so do liquor tax revenues. To Mayor Palmer, that is evidence that drinking increases with the unemployment rate. He says shoplifting and robberies are increasing.

At the Commercial-News building on West North Street in the heart of downtown, the vending box out front no longer contains the daily newspaper. Customers must enter the lobby to buy it. "We had to quit stocking the box during the day," publisher Christy C. Bulkeley says, "because people would stand right in our doorway and steal papers right out of the box."

She gives another example of the way adversity affects behavior: "Our carriers are one of the ways we keep a handle on what's happening because we've got 400 kids aged 12 to 15 out collecting hundreds of dollars every two weeks. We have to keep increasingly closer to those kids to help them make and keep their collections because when people are out of work they feel they need that money more than we do, and they take it from the kids."

Lest this report, the first of a series examining American attitudes and conditions in a sobering period for the country, take on too somber a tone, let it be said that all is not gloom here on the prairie. Other, more positive changes are occurring.

Union and management leaders, for instance, have formed a joint council to address the crisis. Each side concedes past mistakes and recognizes the need to work together in a more constructive partnership. Belatedly, community leaders are looking at ways to go beyond the foundries and heavy industry factories here and attract high technology.

Serious discussions are taking place about the nature of federal-state relations. Some of the extreme voices have been muted by the economic battering. Those who once railed about shiftless welfare recipients are reexamining the need for such assistance programs.

Not the least of the changes has significant political-economic and personal overtones and involves women's role in the community. Professional women have organized an executive club and discuss community problems and national issues just as men's groups have done for so long.

Ron Olsen is an example of the sort of new realism encountered here. He is chairman of the Danville Area Economic Development Corp. and plant manager of Quaker, one of the few big firms thriving and even hiring. Quaker recently interviewed 4,200 applicants, including teachers and other professionals, for 200 factory positions. Some were so desperate for work that they wept during the interviews.

Olsen criticizes calmly but forcefully past mistakes of labor and management: "The work force has to face up to the fact that we've allowed ourselves to become less productive and less competitive. They've got to . . . get off their butts and get back to work.

"At the same time, I'm quick to say management has to carry its share of guilt for what I call business greed. We can't go on the way we used to and survive. We were riding the crest of pretty good times, and we all got comfortable and easy."

He sees a swing back toward prosperity when inflation and high interest rates are brought under control, and a new, more temperate attitude by everyone.

For all its problems, Danville remains a community in which a citizen can describe heartbreaking hardships and yet express faith in the future. God, if not man, will provide.

No one should discount the nature of the problems here and in other midwestern cities. Through all conversations runs an undercurrent of concern about profound changes affecting this city, this region and the country. Expressions of bitterness about growing regional conflicts are common. One businessman put it this way:

"We better take a hard look at what's happening and how people are going to react to the changes we're facing. Are farmers out here just going to sit back or are they, for the first time in their lives, really going to organize? You want to barter, Texas? We'll ship you grain if you do something for us.

"If we get to that point, and we're heading that way now, we're going to have regionalism in this country like you've never seen. That is the danger. We could just be ripping at each other's guts and pulling the country apart." NEXT: The Iron Range story