NEW YORK -- People here remember how the South Bronx became the most famous slum in America.

On October 5, 1977, President Jimmy Carter, in a surprise visit, stood on the scorched earth of Charlotte Street, gawking at the desolation, and promised to try to "turn it around." In his cream-colored limousine, the president drove through miles of burned-out tenements and deserts of rubble, while black and Hispanic men called from the sidewalks, "We want jobs!" and "Give us money!"

Soon afterwards, Mother Teresa stopped by, as if to show that we had our own Calcutta. During the World Series, cameras spanned beyond the bleachers of Yankee Stadium to the billowing clouds of smoke as Howard Cosell intoned, "The Bronx is burning."

Busloads of politicians, policymakers, travelers from as far as Japan and Norway -- even the Bolshoi Ballet -- followed, curious to see, as Sen. Daniel Patrick Moynihan (D-N.Y.) later put it, "an Armageddon collapse that, I do not believe, has its equal in the history of urbanization."

In the next few years, Pope John Paul II, Ronald Reagan and Sen. Edward M. Kennedy (D-Mass.) made pilgrimages. Charlotte Street had become a backdrop de rigueur for aspiring candidates. The New York Times editorialized that a visit to the South Bronx was "as crucial to the understanding of American urban life as a visit to Auschwitz is to understanding Nazism."

Hollywood filmed a drama about the South Bronx's 41st Precinct, "Fort Apache, the Bronx." It starred Paul Newman, Ed Asner and hordes of extras playing junkies, whores, gang members and revolutionaries.

But for all the spotlight's glare, the South Bronx has hardly changed since Carter's visit. Few jobs ever came, and little money. Soon after Reagan's visit, his administration cut federal housing programs nationwide. The city government, recovering from near-bankruptcy and mired in corruption, focused on the boom in Manhattan.

Ten years later, the South Bronx remains ground zero of American urban policy, a paradigm of a ghetto -- only now its poor are rechristened "the underclass" by a new generation of sociologists who often attach to this term the adjective "permanent." This is where the ideas ran out and the redemptive vision of earlier decades vaporized. It is a case study of what has happened in inner cities across the country, only here on a grander scale, befitting the nation's biggest metropolis.

"A city that was accustomed to viewing poverty as a phase in assimilation to the larger society, now sees a seemingly rigid cycle of poverty and a permanent underclass divorced from the rest of society," a high-level Commission on the Year 2000, appointed by Mayor Edward I. Koch, warned recently.

"Without a response to . . . poverty, the New York of the 21st century will be not just a city divided . . . but a city in which peace and social harmony may not be possible," the panel concluded after two years of study.Painted-On Prosperity

Between 1977 and 1985, the latest year for which figures are available, the proportion of the city's population living in poverty grew from 18.5 percent to 24 percent. Of New York's children, some 40 percent are poor. Meanwhile, poverty has grown nationwide, too, from 11.6 percent of Americans 10 years ago to 14 percent in 1985. (Poverty in 1985 was defined as an income under $10,989 for a family of four.)

Walk through the vast twilight zone of the South Bronx: misery assaults you. Subway stations reek of urine. A layer of grime and graffiti seems to cover every surface. Men, able-bodied, wander from corner to corner, sometimes with children in tow, collecting soda cans in plastic shopping bags for recycling. Rusting, disembowled cars sit beside mounds of garbage, uncollected for days. On Lou Gehrig Plaza, with a view of Yankee Stadium's blue bleachers, weeds grow through the sidewalk.

Everywhere there are haunting windows: windows blackened by fire, blocked with cement, nailed shut with plywood, scarred with jagged glass. But wait! Down the block, the windows have pretty turquoise and white shutters and flowering plants. Sadly, on approaching, the prosperity turns out to be a mirage: The city has affixed painted vinyl decals in the window frames of hundreds of abandoned buildings to disguise the blight, because funds are not available for repair.

"A lot of good families with pride and respect have held on through it all," said Genevieve Brooks, head of a nonprofit housing group called the Mid-Bronx Desperadoes -- so named because "we were desperate," she said. "But everything is getting worse: drugs, unemployment, housing, schools. I don't know whether there's a chance for us."

Scattered signs of hope and struggle emerge. Some of the once-opulent art deco buildings on the Grand Concourse -- the Champs Elysees of the Bronx -- are being renovated. A Roman Catholic priest, Father Louis Gigante, has built 1,800 apartments in his burned-out parish over the last eight years. Youth gangs that terrorized the Bronx in the 1970s mostly have disappeared. In "Fort Apache" precinct, a police officer named James Dolan has built a Little League from a dozen teams three years ago to 130 today.

Yet much of the South Bronx seems to live in apathy or on the edge of rage. This is a place where a woman talks to her upstairs neighbor through a hole in her kitchen ceiling that the absentee landlord has refused to fix. It is a place where 78 percent of the students in one high school drop out before graduation; where the children in one elementary school eat lunch standing up because there are no tables.

It is a place where, on July 8, a 42-year-old woman, high on crack, walked into a judge's office and fired two rounds at him from a .38-cal. pistol because he would not release $198 in welfare checks to repair leaks in her apartment.

Justice Abraham D. Levy, 82, was unharmed. He shrugged off the attack as "all in a day's work." A Spreading Disaster

Once a stronghold of Jews, Irish and Italians, the South Bronx today is nearly 95 percent minority -- about evenly split between blacks and Puerto Ricans. Most whites, as they became more prosperous, left for more comfortable homes in the suburbs or in the North Bronx's Co-Op City. Now, of 1.7 million New Yorkers living in poverty, only 300,000 are non-Hispanic whites.

In the fires that burned in the early 1960s through the early 1980s, 100,000 units of housing were lost. The neighborhoods, where people once slept in shifts because of overcrowding, emptied out. More than 300,000 people fled between the 1970 and 1980 census. Now the fires have largely subsided: once the legislature passed a law delaying insurance payments for suspicious blazes, landlords found that arson no longer paid. Today, owing hundreds of thousands of dollars in taxes, they merely walk away from buildings, leaving the city as owner of 1,603 dilapidated South Bronx tenements -- a pattern repeated in Harlem and poor sections of Brooklyn.

The South Bronx landscape remains an eerie chessboard where single buildings stand forlorn amid empty lots and charred hulks of abandoned walkups. While as many as 25,000 apartments have been built or renovated with city and federal funds in the last decade, the demand is barely dented.

"In New York, you have dizzying amounts of wealth living cheek by jowl with sickening levels of poverty," said Felix Rohatyn, chairman of the Municipal Assistance Corporation (MAC), which led the city out of its fiscal crisis in the late 1970s. "But because of our brush with bankruptcy, the city no longer has any illusions about the ability of government to solve all the problems of poverty . . . . We're conscious of our limits."

Theories abound as to why the South Bronx degenerated from merely a poor neighborhood, as it was in the 1960s, to a spreading disaster area by the mid-1970s. A major factor was the flight of the manufacturing jobs, nearly one in four, that had given opportunity to earlier generations of unskilled workers. But some blame the city for reducing services deliberately to depopulate the area for urban renewal -- "planned shrinkage," officials called it.

Others says rent control has made repairs uneconomical for landlords. Still others blame banks for red-lining the area -- refusing to grant mortgages. Landlords and business owners unable to obtain mortgages found it more profitable to torch their buildings and collect insurance. Social plagues are a clear factor: drugs, teen pregnancy, the cumulative demoralizing effect of generations on welfare.

Meanwhile, New York's homeless population has burgeoned to 27,000 and panhandlers spill into the fanciest streets of Manhattan. There is a 20-year wait for apartments in public housing projects -- and the list of 200,000 applicants keeps growing. Some 35,000 families are estimated to be doubled up in public housing, another 73,000 in private housing.

Fernando Ferrer, the new Bronx borough president, remembers Carter's visit. "We were so happy," he said. "It is not every day a president comes into a blighted neighborhood. He made a commitment to rebuild, but it seemed nobody was behind it. It turned out to be rhetoric. The South Bronx was left to twist slowly, slowly in the wind for a long time." Hope and Cynicism

Six months after Carter's trip, Koch and then-Deputy Mayor Hernan Badillo announced a $1.5 billion plan to revive the Bronx and build a 732-unit rental complex on Charlotte Street. But instead, the White House was talking about "leveraging" a few million in federal funds in hopes of attracting private enterprise -- a few job programs here, a federal office building there.

Koch brought in Edward Logue, the master builder of Boston and New Haven who had once headed Gov. Nelson A. Rockefeller's massive housing program. In July 1980, Logue unveiled a new South Bronx plan -- this time to create 25,000 new and rehabilitated owner-occupied apartments, in hopes of bringing back middle-class blacks and Hispanics who had fled the decay; 5 million square feet of industrial and commercial space; 10,000 new jobs and 193 recreation facilities at a total cost of $20 million a year for seven years.

But by then, cynicism had set in. When candidate Reagan alighted on Charlotte Street in August 1980 to criticize Carter's urban policy, he was confronted by residents shouting, "You ain't gonna do nothing! Go back to California!" Reagan confronted the hecklers, saying, "I can't do a damn thing for you if I don't get elected!"

Once elected, Reagan began dismantling federal housing programs on which Logue's South Bronx Redevelopment Organization were relying. Nationwide, funding has dropped by 58 percent since 1981, from $26 billion to $11 billion a year. "There was a piddling amount of money" left for the Bronx, Logue said. "I know how to rebuild a city, but I can't do it with mirrors."

Despite drastically reduced government programs, a Democratic machine that stymied development and a city bureaucracy tangled in red tape, Logue nonetheless left one somewhat bizarre legacy. Ninety-one ranch-style, aluminum-sided, single-family homes, surrounded by quarter-acre lawns and white fences, are being built on Charlotte Street: a surreal bit of suburbia surrounded by scorched tenements.

Critics may call Charlotte Gardens a perverse practical joke on the American dream and criticize the cost of its prefabricated homes, which rose from an originally estimated $50,000 to $102,000. But the families who have bought them -- at a subsidized rate of $52,000 each -- are thrilled.

"You can't describe the feeling," said Patricia Thiessen, a registered nurse who moved into one of the homes two years ago with her husband, Dennis, a television repairman. "There's a sense of pride when you have ownership. It is serene."

But with the last homes still under construction, Logue is long gone. In 1984, Housing and Urban Development Secretary Samuel Pierce ended the South Bronx Redevelopment Organization's $1 million annual grant, to distribute it among other groups.

The group that got the most -- $561,000 -- was a consortium run by former Bronx Democratic chairman Stanley Friedman, recently sentenced to 12 years for bribery and racketeering, and Ramon Velez, a political boss who controls thousands of jobs and votes in the Puerto Rican community. A few weeks later, Velez, a Democrat, endorsed Reagan for reelection.

Corruption in the Bronx is pervasive. Its residents cannot watch Yankees games on television because the borough is not wired for cable, a situation that is now the subject of a federal extortion investigation. A grand jury reported this year that Bronx school board elections are tainted by fraud. Three Head Start centers, serving 200 children, closed in July after it was discovered that funds were missing. It is no accident that Wedtech, the small company that grew to be a major defense contractor by allegedly bribing local and federal officials, is a South Bronx concern.

Brooks, of the Mid-Bronx Desperadoes, gives a walking tour of the Charlotte Street area. On Vyse Avenue, 10 apartment buildings the group rehabilitated with federal mortgage guarantees are graffiti- and garbage-free, a sharp contrast with nearby city-owned buildings, where broken windows, trash and filth attest to long neglect.

"Groups like ours can make a dent," she said. "But we're at a critical stage. We can take a dive if Congress does not come out with new programs to subsidize housing."

Around the corner on Bryant Avenue, Maria Garcia, 25, and her four children live as virtual prisoners in a steamy two-bedroom apartment. She does not let her children out to play because dealers sell crack in the hallways and on the sidewalk outside her door.

"Last night, a man was shot in the back," said Garcia, a Puerto Rican. "A few weeks ago, a child was hit in the shoulder with a bullet. There are fights with bottles. The kids bring 'crack' vials from the school playground. There is no safety. It is like the wild West."

On a recent sunny afternoon, her son, Rene, 8, and her daughter, Maribel, 6, watched a static-ridden television screen as the babies, aged 18 months and three months, slept bathed in sweat.

City officials moved Garcia, who lives on welfare, into the apartment from a homeless shelter last year. For months, she said, the apartment was without water and huge rats would scamper out of a hole in the floor until a social worker from the Mid-Bronx Desperadoes helped her take her landlord to housing court, she said.

In the hall, the metal mailboxes were torn from the wall by vandals. Garcia and other tenants walk a half-hour to the nearest post office to get mail. Every day, her common-law husband leaves the house looking for another apartment and for work, "but he has no luck," she said. "He can't read or write or speak English."

Many blocks in the South Bronx are overrun by crack dealers, according to Police Officer Mickey Gonzalez, who has served at the Fort Apache precinct since 1973. "Heroin affected adults mostly," he said. "But the crack epidemic is affecting 12- and 13-year-old kids. We make arrests, but when you take one in, he's replaced by 100 others. How many can you arrest? It's almost like it's too late."

South Bronx has no in-patient drug treatment facility. A 22-bed unit is planned as part of a $181 million renovation of Bronx Lebanon Hospital, but a spokesman said it will fill up the first day it opens.

"There's a hopelessness in this community," said Mary Morales, head of a South Bronx clinic that sees 3,000 pregnant teens a year. "These youngsters don't feel there's anything out there for them. Fifteen-year-olds who were raised by single parents are having their own children. What's new is that a lot of youngsters in our community are suicidal." Community Disintegration

In the basement of St. Anselm's church one recent evening, 300 blacks and Hispanics from 30 parishes, Baptist and Catholic, gathered to organize a rally. The group, South Bronx Churches, has raised $800,000 to develop a grassroots lobby to "take charge!" as one speaker put it. Beginning with small issues it plans to move on to housing and corruption.

The task is daunting, even for a group that has organized similar efforts in other cities. "I have never seen this level of disintegration in a community," said James Drake, a veteran organizer. "When I was in Mississippi, no matter how poor people were, their networks were intact. A little Baptist church might have 40 families but they really belonged to that church . . . . Poor people in South Central Los Angeles were able to beat back a tax referendum this year. They had a sense of ownership."

The window decals put up along the Grand Concourse in 1983 remain there today, but they are peeling at the edges. New decals are being placed on other recently abandoned buildings. And, across the globe, the South Bronx remains a symbol of failure.

On a TV program this summer, an American interviewer defended U.S. democracy to Soviet Foreign Ministry spokesman Gennadi Gerasimov, saying, "We have the American dream. . . . People can be born into poverty. They can escape poverty."

Gerasimov countered, "Suppose you live in the South Bronx? Can you escape poverty in the South Bronx?"

NEXT: Official corruption