India ceased being a Buddhist country after centuries of rivalry with unfriendly Brahmins, with the final collapse evidently being caused by Turkic invasions during the middle ages, in which the conquering invaders sacked and destroyed monasteries, shrines, and Buddhist universities. The Hindus, being somewhat less pacifistic than the Buddhists in those days, were more inclined to fight back against the Muslims and often won, but Buddhism was almost completely wiped out. The majority of Buddhists who were not killed either converted to another religious system or fled to nearby Buddhist countries like Tibet and Burma. However, all schools of Buddhism that have not abandoned the historical Gotama Buddha are still deeply conditioned by ancient Indian culture.
It is sometimes said that the Buddha was a Hindu, and that Buddhism was essentially a reform movement of Hinduism, much as Jesus, a devout Jew, began a reform movement of Judaism. From a historical point of view this is not a very accurate statement however, partly because it is anachronistic; Hinduism as it exists today simply did not exist in the Buddha's time. The Brahmanism that was the prevalent religion in Vedic Indian culture in many ways more closely resembled the paganism of ancient Greece than it does modern Indian religion: it was a relatively world-oriented system in which men sacrificed animals to the gods for the purpose of receiving worldly benefits such as increased livestock, more sons, and victory over enemies. Even a few of the gods were shared with the Greeks; for example the Rig Veda mentions a sky god named Dyaus Pitar, equivalent to the Greek Zeus Pater, the Roman Ju-piter, and Ziu or Tiu of the ancient Germans (in whose honor Tuesday is named). To say that the Buddha was a Hindu is somewhat like declaring that Jesus was a Muslim. The Muslims might accept that statement as true, since they consider Jesus to have been a genuine prophet of Allah; in a similar way, Hindus may consider the Buddha to have been a Hindu. The Hindu tradition that Buddha was an avatar of the god Vishnu further complicates the issue.
But it would be inaccurate even to assert that the Buddha was a faithful member of the Brahmanistic Vedic religion, despite the fact that he participated in a clearly Vedic culture. Buddhism uses many Vedic terms and ideas, but it is more the product of an indigenous subculture than of Vedic tradition. I suppose this requires some explanation.
Before the Indo-Aryan speakers of Vedic Sanskrit invaded in the second millennium BCE, northern India was dominated by what is called the Indus Valley Civilization, one of the five great prehistoric civilizations known to archeologists. It was apparently an intensely spiritual culture, although very different from what many modern people would associate with religion; the spirituality of the prehistoric Indus Valley evidently was characterized by atheism, materialism, and what may be called, for the sake of convenience, austere pessimism.
It was atheistic for the simple reason that a God was not seen as the creator or lord of the cosmos. Much like modern science, the prehistoric Indus Valley "religion" emphasized impersonal Law as the governor of the Universe. Gods and goddesses apparently were acknowledged to exist, but, like the gods of the Greek and Roman Epicureans, they themselves were subject to this Law, and had relatively little influence over the destinies of human beings. They had their own lives to live, their own business to mind.
It was materialistic in that physical matter was deemed ultimately real, not an illusion or the manifestation of some kind of Divine Thought, as later mystical traditions have seen it. It may be that even their philosophical equivalent of karma was seen as a material substance.
And it was "pessimistic" in that it saw this world as a bad place to be; existence here was considered to be, in plain language, icky, and something to be escaped from. A spiritual life was thus seen as a process of disentangling oneself from all defilements that keep our spirits burdened and weighed down on this plane of existence, and this generally involved yogic practice, including some rather extreme asceticism for those who were really dedicated.
After the Indo-Aryans conquered the land many of the conquered people presumably continued following their ancient traditions. These traditions certainly affected the Vedic culture of the Buddha's time; for example the superhuman beings called yakkha in Pali may have originally been deities or nature spirits revered by the earlier inhabitants, which were granted a status lower than the Vedic gods but still respected (to be on the safe side) by the Sanskrit-speaking conquerors. More importantly, the aforementioned atheistic, materialistic, and pessimistic spiritual tradition was kept alive. It may have held a fascination for many, as it was of a deeper and more philosophical nature than the paganism practiced by the Vedic mainstream. It is likely that the yogic practices and many of the beliefs of the older system influenced the trend toward more unworldly spirituality among the Brahmins, culminating for example in the Upanishadic literature. Some of the older Upanishads probably existed in the time of the Buddha, although it is difficult to say how familiar the Buddha was with these still esoteric, even secret, texts.
In the Pali literature there is much mention of samaṇas and brāhmaṇas, "philosophers and priests," with the priests of course being the Brahmins, members of the priestly caste and intermediaries between men and the Vedic gods. The philosophers, on the other hand, were more a product of the older tradition. Possibly the purest representatives of this tradition nowadays would be Jainism, of which there are still a few million followers, and Sankhya, the primary philosophical basis of Yoga. The Buddha was not a Brahmin, and was apparently born and raised on the very outskirts of Brahmanistic culture. So it should be no surprise that Buddhism is more of an Indus Valley phenomenon than a Vedic one, even though the Buddha did translate his terms into the language of the mainstream.
Thus Buddhism began with some basic, very ancient assumptions that most people can't relate to very well in the modern West. The absence of a supreme God looking over us, as well as a somewhat materialistic orientation, have been readily accepted; but the idea of the world being a place to escape from, and even more importantly the idea that it is escaped from through renunciation of society and rigorous, even ruthless austerity, are hardly likely to be appreciated by a large percentage of Westerners any time in the foreseeable future---unless some huge crisis turns our view of the world upside down, which, I suppose, is possible.
The prehistoric assumptions on which the Buddha-dhamma was largely based, and which were added to it even more as the philosophy developed, effective as they are for those who can relate to them and accept them, may ensure that Theravada Buddhism especially, which is the most conservative and Indian of the surviving sects, will never become more than a fringe movement in the West.
This may be seen in the radical transformation Theravada has undergone upon its arrival here. Aside from a scattering of monasteries (following Asian traditions and being mainly supported by Asian communities), almost all that remains of Theravada after the migration is a few elementary meditation techniques, plus some philosophy for those who have the time for it. Even the traditional minimum requirements of the Three Refuges and Five Precepts are often ignored. This sort of degeneration of tradition, of practice, and of the results of practice may be inevitable if Dhamma remains so deeply conditioned by the ancient foreign culture in which it arose.
Western scholars point out that the Pali texts are not reliable authorities on what the Buddha actually taught---the texts evolved over a period of centuries, and even the so-called "core texts" shared by all the ancient Indian schools evolved over the course of a century or so (and as the history of early Christianity shows, a great deal of change may occur in one century). Yet even if we could analyze the Pali Canon and determine with certainty what the Buddha really taught, which is a virtual impossibility, still we have this matter of ancient Indian assumptions taken as axiomatic, which modern Westerners do not consider to be self-evident at all, but which are thoroughly mixed up with essential Dhamma.
That the Buddha apparently took for granted some of the assumptions of his culture, or subculture, does not mean that he was not enlightened; an investigation of the spiritual literature of the world shows that the greatest sages have gone along with their cultural conditioning, if only for the sake of convenience.
But by this same token, if the people of the West are to be guided effectively in their spiritual seeking, they should be guided in a way that they can relate to and accept. Telling them that they should renounce the world, become wandering ascetics, and cultivate very deep and subtle contemplative states isn't likely to be very effective. True Dhamma is alive, and cannot be contained in words, especially in dogmatic words, and especially especially in the dogmatic words of an extinct foreign culture.
So, the natural question is, how is Dhamma to be most effective in the West? How does one take what is essential to true Dhamma, disentangle it from ancient Indian culture (not to mention the culture of South Asia, whence Theravada has come to us), and inoculate it into a cultural system dominated by scientific materialism, consumerism, lukewarmness, self-importance, artificiality, and pervasive stress?
To give a very simple, basic, and obvious example of the issue: If the Buddha were alive today in the West it is hardly likely that he would have his most dedicated disciples dressed in yellow, brown, or orange robes. The original monk robes were just a shabbier version of what laypeople wore at the time. Nowadays they might be wearing secondhand grey sweatpants and a sweatshirt.
It also seems unlikely that he would set up multimillion-dollar luxury Dharma resorts.
I suspect that wandering asceticism is pretty much out, but that the Western habit of avoiding discomfort and pandering to our own fussiness and weakness simply is not going to work either. Avoiding what we like may not catch on very well, but consistently trying to avoid what we dislike is bound to keep us asleep. It is mainly through emotional discomfort, not physical discomfort, that we see what our attachments are ("Attachment is the cause of all suffering"), and we can thus gain insight into how to transcend those attachments. I won't presume to prescribe what an effective Western Buddhism would be like here, but I feel that "emotional asceticism" would be part of it---looking at what makes us uncomfortable and not blaming whatever it is, but seeing the attachments, the preferences, the ego issues behind it that require protection and feeding to keep them alive. For this sort of practice, living a life full of unsettling, challenging interactions, possibly in a community of more or less like-minded people, may work better than meditating and chanting alone in a forest.
Another very likely element of modern Dhamma would be a minimum of theory or dogma, with what little theory there is not insisted upon, but received as a working hypothesis. There would be no "Only this is true! Anything otherwise is wrong!" with regard to Buddhism, the secular world, or anything else. Another one, naturally, is being present in the present moment, being mindfully aware, which includes a non-judging awareness of arising mental states, including icky, negative ones. There would also probably be more emphasis on love. Whatever form (or formlessness) an effective Western Dhamma would have, it would have to include whatever it takes to jostle or jolt us out of the ruts of our habit-driven stupor. It may not conform to any of the recognized schools, however, and traditional Buddhists may not even recognize it as Dhamma.
Despite the more psychological and less physical nature of a probably successful Western Dhamma, some physical austerity also is called for, if not for the sake of spiritual development, then for the sake of not ruining the world with our waste. A cooler house in winter, fewer luxuries, less travel, etc. may be a real necessity on a planet inhabited by more than 7,000,000,000 people, not to mention countless other beings sharing the space. In the Buddha's time there was no danger of the human race wrecking the earth's ecological balance and turning it into a desert, which may be one reason why solitary renunciation was the ideal; but now the idea of worldwide cooperation, harmony, and peace is pretty much mandatory. A feeling of us---not me, not us versus them---may be essential to the success of this. As the saying goes, we are all in the same boat.
An image of Gotama Buddha before his enlightenment,
practicing severe austerities