AS the smoke rises above the ancient Croatian city of Dubrovnik, from fires ignited by Serbian shells, the dream of a truly new world order is dissipating.The ongoing conflict among the nationalities of Yugoslavia - like the invasion of Kuwait - has challenged the world to establish whether might makes right: Will the right of a people to choose its own destiny depend on its having the armed might to repel its neighbor's predations? This time, we are failing to meet that challenge. As if blind to the present moment's unprecedented opportunity for creating new structures of international order and justice, the world community is allowing the old and well-worn pattern of war and conquest to repeat itself. It is a failure of imagination. The plague of war and the rule of power may seem a chronic disease of humanity, but the future need not be like the past. It is our task to imaginatively grasp those moments when history might be turned in a new direction. Is not now - with the cold war over, with democracy victorious, with the coup failed in the Soviet Union - such a moment for the creation of an international order governed by justice instead of force? At least, is not the time ripe in Europe for the germ of such a global order to take root? And at this moment - with the Soviet empire splintering, with nationalistic aspirations rising, with ethnic strife growing - is not the only prudent way of providing for future security to work vigorously toward such an order? The "defining moment" of the post-cold-war world. That was the rhetorical banner under which the world rallied, less than a year ago, to reverse Iraqi aggression in Kuwait. But just what is it that was defined? Evidently, a world that allows an imperialist Serbia to brutally suppress democratic Croatia's aspirations for autonomy. When the world's oil lifeline was at stake, the nations of the West sent significant forces to confront a dangerous military power. Now, when "all" that's at stake is the right of self-determination, and the resolution of disputes by peaceful means - and when the aggressor commands a tiny force in the midst of an unprecedentedly coherent continent - not even a gunboat has been sent. (At any point, this war could have been swiftly ended with one aircraft carrier, sitting offshore in the Adriatic Sea, sen t under multilateral auspices along with the announcement, "Whoever violates this ceasefire will be punished from the air.") The European Community's efforts, though well-intentioned, have been resolutely toothless. Even a tiny aggressor cannot be deterred by mere words with no force to back them up. An American assistant secretary of state explains we can do nothing to make peace unless the parties themselves all want us to. Evidently, if the Serbians want the fate of Croatia to be determined by Serbian tanks rather than by higher principles, there is nothing we can do. I don't recall, however, that the Iraqis invited us to come in and settle their dispute with Kuwait. Is it a matter of the inviolability of national boundaries? Is that "new world order" we heard so much about only to protect already-established sovereign nations, like Kuwait, while leaving nationalities within previously established boundaries at the mercy of the strongest army any one of the factions can command? The French and Spanish, we hear, have been loath to deploy outside forces to protect the Croatians because they each have restive peoples - i.e., the Corsicans and the Basques - within their borders. But in the truly new order that we should be envisioning, states would be safe enough to let go of those old habits of thought that made domination seem necessary. (We need to control our little neighbors lest they become an enclave for our bigger enemies.) These old habits only perpetuate the old, unending pattern of resentment and conflict. By itself, allowing the splintering of states can imperil the peace. We don't want to "Balkanize" the world, multiplying the number of possible capitals for hatreds to be nursed and for plans of war to be hatched. But if this breaking up of nations held together by force is combined with the institution of an overarching international system of order and security, granting peoples the freedom to shape their own destiny can be key to achieving real peace. It is said that the Yugoslavian tragedy is a cautionary tale of the disaster that might happen, on a far larger scale, in the Soviet Union. By the same token, the Yugoslavian situation affords an opportunity to establish comparatively cheaply a constructive precedent for the principles (democratic self-determination) and methods (international adjudication and peacekeeping) that should govern the unfolding of nationalism in the new Europe. Sadly, the great powers have persisted in seeing the battle in Yugoslavia as a minor, local matter. Understanding the new order in Europe as a chance for making deals instead of making peace, they have refused to sacrifice their ease to achieve a Yugoslavian settlement. It is said that this bloodshed between Yugoslavian nationalities marks the first outbreak of war on the European continent since World War II slaughtered millions a half a century ago. Regrettably, in their shortsighted inability to envision either the dangers or the opportunities, our leaders are missing a chance to help see to it that this war is Europe's last.