The Indians got rid of one enemy before turning inwards on themselves. Muslim vs Hindu no? Its just human nature. How can you fight against human nature without changing humans. Humans can't change on their own not truly, they can as you said bury hate/prejudice deep down inside themselves but its not gone its just suppressed.
Really the sages attempt to create a race of "connected" individuals was doomed to fail before it began, the limited nature of the number of people he could teach (or gift) within his chakra was always going to create a segregation in society between those that have and those that do not have. Not to mention the scale of the experiment was terrible.
A better idea would have been to create an ORDER of peace. An organization capable of mediating and trying its hardest to control human nature. IE basically jedi knights, instead of giving chakra to anyone, he should have gathered like minded individuals that wanted peace for the future to pass on his and their dream to future guardians alongside that power of chakra. But the fact that Chakra became inheritable was terrible he should have found a way to limit it for people to pass on the chakra voluntary to people who were of a similar nature rather than those that are power hungry for powers sake. By keeping his chakra divisions small he could retain potency but also keep the numbers small. They could stop wars instead of joining them.
Ultimately he just messed up and is responsible for even more devastating wars that not only kill more people but destroy the landscape when they happen...
