SEOUL -- Last week, the South Korean government was rounding up suspected "leftist subversives" and warning darkly that democracy itself was threatened by surging labor unrest. This week, ruling party leaders were shaking hands with rival politicians after drafting a new constitution in an unfamiliar atmosphere of conciliation.

The contrast reflected a split within the ruling party about the benefits and dangers of self-rule in a nation accustomed to military coups and authoritarian regimes.

But the contrast also reflected diverging trends within South Korean society, torn between the yearning for more freedom and democracy and the fear that things could spin out of control and drive the nation back into dictatorship.

Since July 1, when President Chun Doo Hwan bowed to a wave of street protests and promised direct elections and other reforms, a new openness has taken hold. There is a sense that, after decades of frustration, democracy is finally at hand. Long-banned songs are now aired; politicians whose names could only be whispered appear on national television; sidewalk vendors cheerfully peddle underground magazines. The first genuinely contested election in 17 years is scheduled for mid-December, and thousands of workers have staged peaceful and moderate strikes.

Despite these changes, no one is celebrating.

Chun, who assumed power in a 1980 coup, remains ensconced in the presidential Blue House. There has been no flight into exile, as with deposed Philippine president Ferdinand Marcos or former Haitian president Jean-Claude Duvalier, and no cathartic break with the past.

Moreover, after decades of varyingly repressive governments, the lid has been partly lifted this summer, and it sometimes seems that the accumulated grievances of the entire 20th century are spilling over.

There has been no resolution, and no accounting, for the major traumas of modern Korean history -- the Japanese occupation, the division into two Koreas, the Korean war and the military suppression of a 1980 civilian uprising in Kwangju. As a result, popular resentments have simmered and strengthened.

Thus, everyone from National Assembly chauffeurs to peasants claiming they were cheated during a 1950 land reform program have staged protests -- more than 2,000 strikes, sit-ins and other disputes this summer alone. In 1961 and 1980, when South Korea also seemed on the verge of democracy, Army generals cited such burgeoning protests as justification for military coups.

Many Koreans insist, almost as if they were trying to persuade themselves, that 1987 will be different. South Korea is far more educated, literate and wealthy than it was 27 or even seven years ago. There is a conviction bordering on religious faith that political development must now catch up to economic progress.

In addition, no one wants to jeopardize the Olympic Games, which are scheduled to take place in Seoul a year from now and are a source of great national pride. Opposition leader Kim Young Sam said the games will truly be a success if an elected mayor of Seoul -- all local officials until now have been appointed by the central government -- carries the national flag into the Olympic stadium.

All of this matters to the United States, not just because of its interest in nurturing democracy, but because its security interests are closely linked with those of South Korea. Forty thousand U.S. troops share border duty with the South Korean Army, facing a heavily armed communist north, and South Korea has become a major U.S. trading partner.

But in a nation with little experience in compromise, negotiating and self-restraint, there is much unpredictability. When workers at a hospital in Koje Island last week objected to a television news report suggesting that police had used ambulances to transport tear gas grenades during recent demonstrations, they did not write a letter to the editor. Instead, they grabbed the reporter and held him hostage until the station carried an apology on the air. When union officials at the Daewoo shipyard on Koje reached an agreement with management that raised wages and family benefits, bachelors staged a protest, claiming the settlement discriminated against them.

On a larger scale, too, recent events illustrate the volatility of the situation. On the same day that Seoul bus drivers returned to work after only a few hours on strike, riot police in Koje fired tear gas canisters at striking shipyard workers, fatally wounding a 21-year-old laborer in the first death from the summer's labor unrest.

Protests over that death again threatened to lead South Korea into the chaos of general strikes and mass protests until workers and management in Koje settled their strike, bringing the nation back from the precipice of civil strife once again.

Late last week, the government began rounding up student activists, labor leaders and others in the first political arrests since June. One key student leader was arrested for criticizing the regime in interviews with foreign reporters, and Chun said he would take "resolute action" against "subversives {who} try to agitate the public."

Diplomats in Seoul said that Roh Tae Woo, president of the ruling party and its presidential candidate, seems not to have faltered in his determination to see the election through. But they said that Chun and some of the military people around him were showing increasing doubts.

"Chun is back to only talking to the heavies," one diplomat said. "He's back to listening to people who only tell him things that can fit into his world view."

Opposition leaders Kim Young Sam and Kim Dae Jung have renewed their call for release of more political prisoners, while Chun essentially labels those still behind bars as spies or subversives. The two Kims continue to promise not to engage in a bruising internecine battle, but each has escalated his own campaign preparations.

Students have returned to universities from summer vacation, and many of them appear to scorn the current reform process, rejecting both parties as right-wing and calling for more revolutionary change. Whether their protests will resonate with workers or the middle class this fall, as they did in June, looms as a major question.

Over the past month, eight politicians from the two major parties met every day, often for five hours at a time, and raised their voices only once in their fifth-floor meeting room of the National Assembly, where fisticuffs and police intrusions have punctuated past debates.

They emerged Monday with a remarkable draft constitution that would guarantee labor rights, curb the power of the presidency and pledge military neutrality in national affairs. "In a sense we have a good situation, because both Kims think they can win and Roh Tae Woo thinks he can win," another diplomat said. "I think there's still a lot of betting that the military is going to let the situation play itself out."

If the schedule holds, the National Assembly will approve the constitution this month, sending it to a public referendum in October. Presidential elections would be held in mid-December, and next February, Chun would become the first Korean president to cede power voluntarily.