As a long-time resident of Chicago, I'll try to answer your question.
What is going on in Chicago?
I'll assume you're referring to the violence, specifically the shootings and killings. While we're trending higher (we've already hit last year's total with a quarter of the year left), it is not as high as the mid-70's. As bad as it was then, the crime was contained in certain areas, just as it is for the most part now. However, every shooting, every death is reported in the media. And with the graphics used in the media reports, it's stunning to see the weekend shootings/deaths on a regular basis.
Keep in mind, the majority of these acts are confined to specific swaths of the city (south and west sides) and specific times (midnight to 7am). Since most people aren't in those areas at those hours, it is very avoidable, with some exception.
Who is killing who? Again, for the most part, it is gangs killing other gang members and/or their family and friends. And, yes, they're notoriously poor shooters who leave innocent bystanders as victims.
On occasion, truly innocent people are shot and/or killed, such as the child at the park for a cookout, etc. Again, somewhat avoidable if you're not lingering on the front porch with friends/family who are targets.
As for the city, parts are doing better than ever: the downtown area is continuously inviting visitors for shows, fests, etc. The area stretching north along the lakefront is beautiful and costly. The area along the lake running south to South Shore is naturally beautiful, albeit with chancier spots. The south side (almost twice the geographic size as the north side) has large swaths that are dangerous (Englewood, Roseland, etc). Most have very solid housing stock which still keeps residents despite the violence. The west side has as much violence in a confined area.
Since it's unfeasible to put a cop on every corner - or a cop at every cookout, or kitchen ... the violence ignites continuously. With few jobs, particularly for the lesser-skilled, the idleness is the simplest cause. The best jobs are those in the public sphere: the post office, the public schools, the city, the county, the state, the federal government - or some derivative thereof. Thus, when talk of changing some structure of anything happens, such as closing/consolidating under capacity schools, the screaming erupts.
The people know that if the breadwinner loses his/her job, the whole family is out.
Politically? It's hopeless. I covered politics for a trade publication and recall counting 30 or so precincts (~350 voters) that went 100% (every single voter, no errors, no omissions) for Obama in '12. Lockstep. The mayor was essentially chosen to follow Daley (see, corrupt financial mess) by Obama. With financial problems that are simply unsolvable (the five city pensions are unsustainable), he's left to his arrogant personality. Last election, he conspired with the states attorney to hold back a cop shooting video (yes the suspect was out of control, but the shooting was too much) until after the vote. Once released, we had a racial tinderbox.
As for the schools, the CPS is a jobs patronage program, NOT an educational service. We've only had one strike (and another one day walkout) recently. Of course, we're headed for another even though the city is insolvent.
I forgot to mention the city now had junk rating by the major credit rating agencies. Thus, they're not buying our BS anymore.
We recently were hammered with a property tax increase. Increases of 30% were common, with many above that figure. We've sold our parking meters for a quick fix a few years back, sold a tollway, put in a red-light camera system (again, a corrupt deal) and shortened the yellow light to goose up the violations. Residents now fear a trip around the corner will cost them $100, no court hearing.
A few years back, near the end of Daley's reign, Chicago tried to get the Olympics in '16. Plans were made, designs were drawn up and guests were wined and dined. The insiders figured that with their favorite son in the White House, he'd be able to push for Chicago to get the nod from the IOC. The deeper story was that it would allow the city to sweep all of their financial ills under the carpet, just a bit longer and get the grand boondoggle of spending to come to town. I recall walking through the large public plaza the day the vote was to be made announcing the city as having won the bid. Huge video boards had been arranged, stages were erected, sound systems were booming music and organizers were busy handing out t-shirts to everyone. It was only about 11am when the video broadcast the finalists for the vote that would happen a few hours later. Chicago was not mentioned.
The news shocked the organizers. They stopped their actions, looking stunned. Bodies ran into the county building/city hall and the state building across the street. It was as if their horse in a fixed race didn't leave the gate. They were beside themselves, and couldn't believe that they'd been out-hustled by corrupt hustlers somewhere else.
Daley would remain for awhile longer (even as his wife was dying of cancer) to hold the whole grand scheme together. But he eventually left, handing over the job to Emmanuel. The problems are too great to fix. We'll continue falling, bit by bit and piece by piece, over time. We'll always have the lakefront and a few attractions, like Navy Pier and Wrigley Field, but much of Chicago will devolve into something akin to Detroit: unable to provide a viable living setting for anyone, especially families.
Thus endeth the lesson.