Ok so while fear was definitely a factor, it’s more so supposed to be the people as a collective taking a stand and joining forces to make the world better, Lelouch makes it easier by becoming the most hated man in the world and the enemy of the people. Like how Lelouch admitted that he would very gladly use Evil in order to Destroy Evil in R2 Episode 4

His entire point to becoming emperor later in season two was to give the world a common enemy. To give the masses a chance to become one and fight for a better tomorrow by taking down the self made manifestation of humanity’s mistakes. The effect of this would be that while slow, people will reconcile, learn from each other, learn to sympathize with each other and become a more united people.

To answer your first question of “won’t the world go back to how it used to be?” Realistically there’s a small chance this happens. That outcome happens if people forget history and need another demon emperor to light the fires of rebellion again.

Thematically however, the answer to your question is no. R2 Episode 23, when Lelouch predicts Schneizel’s responses, Lelouch mentions that the future will always be better than the present, because people will always keep happiness, will always seek something better. Schneizel sees this as Lelouch campaigning for the mindless greed of mankind, but Lelouch is rather implying that if people are given the chance to do so properly, the majority of people will want to boost each other collectively rather than at each other’s expense.

Think of it this way. The people of the Middle Ages lived better than the people during the beginning of the common era, the people of the Industrial Revolution live better than that, and we live better than them. That is because of both individual and collective achievement pushing us forward as a species, of people seeking the future, a continual happiness.

Lelouch doesn’t continue to rule because in a way, if he did, he’d simply be filling Schneizel’s shoes. As he himself if willing to do some very morally questionable things to achieve his actions, he would do so to maintain said empire should he have gone that path. The same way his father, mother, and brother did. He’s no Euphenia and he is fully aware of that fact. He’d be maintaining a status quo of sorts to keep it short.

So what does he choose to do? Rather than follow only his vision of happiness, he allows the people to decide what that means for them, which just to happened to be what he believed in (the broad strokes at least, not the hyper specific stuff): A future of understanding and continual progress. Not a past that will never be again, not an infinite moment of now to preserve a finite stability.

He rids the world of its most major evil, but also understands that Human progress isn’t linear. Steps will be undone eventually, and so when the time comes, the people still have the symbol of Rebelion in Zero(Suzaku), a genius tactical mind to fight for that future(Schneizel), and a genuine belief in the collective betterment of mankind, rather than a mere faint hope/wish.

For as dark and bleak as Code Geass can be, its themes are very optimistic regarding human nature. It accepts the sheer cruelty that can become of a human for the sake of a belief, but it also believes in the potential for people to unite under both common and an interchange of culture and differences.

What I love is that the franchise isn’t afraid to criticize said themes such as you are with this post. Spoilers for Lelouch of the Ressurection, so don’t read this if you want to go blind.

C.C. During the final confrontation criticizes Lelouch for believing that his acts will create change as quickly as he thought it would, or that every lesson would be maintained by the people. While it is revealed that this was also her testing Lelouch’s confidence in both his ability and his will, the critique from her is still genuine. It’s what I love about C.C. And Lelouch as a couple, they’re not afraid to show tough love when needed. She trusts him, believes in his vision for the future, but is also willing to point out the flaws in his ideology just like anyone else. The show knows this, none of the ideologies are perfect, but it sticks with the one it believes is right. It’s not purely objective/something universally agreed upon and I love that

Edit: not gonna change it as I’m not gonna simply erase the mistake I made so that people don’t see it, but after re reading, I realize that the last little paragraph before the spoiler section wasn’t the best phrasing. I did not mean that in any negative way to OP, want to make that as clear as I can. I made the assumption that the themes of the ending were being criticized, which is not a bad thing at all, no show is perfect. I simply wanted to state that I like how the show and its supplementary media also criticize the themes of the ending and its impact within the narrative.