Chelm is a Polish town famous in Jewish folklore as a town of fools. One story is that G-d sent his angels to populate the earth, each with a basket of wise souls and a basket of foolish souls which they were to distribute evenly. One angel was daydreaming, and hit a tree (or a mountain, depending on which story you're hearing), and spilled her basket of foolish souls all in one place -- Chelm. Many stories and jokes are told about the tortured logic of the Chelm-ites.
In Singer's story, the first "sage" of Chelm called a council meeting to solve the problem of poverty and famine. He decided to go to war with a neighboring village, for no reason than that the other village thought the Chelmites fools. (It doesn't work). The story goes on from there, as one foolish thing follows another. The lost war is followed by a revolt, followed by another revolt, and so on, and then the Women's Party takes over. ;-))
Told with Singer's inimitable and sly wit, the story is enhanced by Shulevitz' delightful illustrations.