not a very in-depth scenario there... i mean, did nuclear weaponry and everything suddenly disappear?
i don't think governments would panic quite that much, especially since terraria still has pretty modern weaponry, and even futuristic weaponry, governments would clearly get their hands on those.
nothing would change, most likely... we'd still be under governmental rule, individual civilians wouldn't be able to become great heroes and shoulder the responsibility of protecting the world.
i mean, realistically, people would probably get themselves killed trying to play hero.