|"We have white elves, white dwarves, white humans, all sorts of different races."|
That said, I thought that simply importing real-world contemporary racist terminology wholesale into a fantasy game where there are hobgoblins, elves, etc. wouldn't necessarily make a ton of sense, and it might lead to misunderstandings about what I was trying to do. Plus, I myself would find it pretty awkward and weird to be spouting racist terms constantly when I attempted to depict the coarse speech of the everyday Emerni. It's specifically the terminology that seems to be the critical point. Putting slaves and slavery in games isn't going to automatically get people's hackles up, but using real world racist terminology definitely will.
Because of that, I decided to invest some time in creating an alternate set of racial / special categorisations that would be more appropriate, and allow for some critical distance when they are used. I also wanted to simplify the casta system so that it could be presented quickly, as an aside at the right moment, rather than turning into an extended lecture. Finally, since epithets tend to be culturally-specific, I knew that another culture's most vile term of abuse would mostly roll off the backs of my players.
The main cultural divide in the Old World is between the Emerns, and the Tash. The Emerns are primarily dwarves and humans, the Tash primarily elves and hobgoblins. Dwarves and humans have the same range of skin tones that humans do in real life, but the groups in Emern are pale or olive ("white", though the existence of creatures with white-like-snow skin means that terminology is not used and is just confusing).
In Tash, hobgoblins come in maroon and umber varieties, while elves have dark-brown or green-skin comparable to an actual olive. The drow, which are sort of the elvish equivalent of albinos, form a self-sustaining third group at the apex of Tash society, though they are extremely rare (there is one in all of Arkhesh). All three groups have pointed ears comparable to the elves in the image that starts this article.
Terms of racial reference to Emerns by Tash, in order of offensiveness "Emerns", "pinks" or "pinkies", "stinkers", as human and dwarves eat a diet that causes them to smell bad to Tash noses. If they need to break apart the two racial groups, they call dwarves "Shorties" and humans "Biggers".
Emerns referring to Tash have a similar set of terminology. "Tash" is the most polite, followed by "points" (for the ears) or "rocks" (the Tash worship a mountain). Elves are known as "greens" and Hobgoblins as "tuskers".
Any child of a mixed race background (humans, elves, hobgoblins and dwarves are all interfertile) is known as a "mestizo", "metis" or "mulatto", the rare time in which I decided to use real world terminology since at least two of the words aren't offensive and the third is somewhat archaic.
The Arkheshi are the natives of the new continent. They include everything from brown-skinned humans and dwarves to grey-skinned hobgoblins and elves, who all breed together (all groups are interfertile with one another), much to the disdain of the Emerns and Tash.
Emerns and Tash see themselves as part of the "Gentes de razon" (the people of reason), while the natives are "Gentes sin razon" (people without reason), though this is a technical distinction mainly used in formal contexts. "Arkheshi" is a term used only by the foreigners, not the natives, who call themselves "Ikani" or "Xorca" or after their local tribe. "Natives" is the most common term, and is not pejorative, but "Cannibals" is common and is. "Mutts" is common, since the most notable feature about the Arkeshi to Emerns and Tash is that they freely reproduce with one another (this was more common at one point in Emern-Tash relations as well, but most people don't have a strong sense of history).
Black people exist, and the most commonly encountered types are black humans and black halflings, both of whom come from the southern frontier of the Empire of Tash, where they are enslaved, sold to Emern shippers, who then transport and sell them in Arkhesh. At this particular point in time, the slave trade is only developing, with more trade in Arkeshi slaves than black ones. The accepted term is "darks", with halflings called "halfers" and humans called "fulls" (from the size of berth they occupy on slave ships, this is slaver's argot that has bled out into the general population of Heshtown). There aren't any white halflings in Emern, so most people still aren't clear about whether halflings are kids, dwarves, humans, or something else.
The gradation allowed by these has the same effect as varying racial terminology does in real life - it allows people to precisely and clearly indicate their opinions on people different than them, while also allowing them to use euphemism to obscure their more vicious feelings when convenient. It also subtly signals the class of the person using them, as lower class people tend to use the more abusive terms, while members of the upper class favour euphemisms.
For example, Paulie, the proprietor of the Rover's Rest, is one of the few bartenders in Heshtown who serves mixed clientele (elves and hobgoblins; Heshtown was founded by an Emern), and is definitely the nicest public house to do so. Paulie himself, being a man of broad mind but limited education who is rising out of the lower class into the middle, uses racist terminology frequently but without hostility, and if a customer asks him not to, he respects that wish. By contrast, Captain Rudolfo, the captain of a slave-ship who puts on airs of being a gentleman sailor while being pretty much the opposite in practice, uses the euphemisms but with venom in his voice, and when he loses his temper he slips into streams of the coarsest racial invective.