Lately, we've seen DnD and Pathfinder move away from some of the more blatant signifiers, like renaming "race" into "species" and "ancestry," and in the case of Pathfinder, having systems in place to mix ancestries in a character build. DnD has decoupled good and evil from species, and pathfinder has done away with good and evil entirely ( keeping a vestige of it present for things like demons and angels).
Race is almost alwys tied to a language and a culture, with, say, kobolds having the same certain cultural signifiers all over the world. To an extent, this makes semse because different peoples in these games can have different physical abilities, or have different origins entirely, which would naturally lead to them developing along different lines -- If one people can breathe underwater and another was born from a volcano by a specific god's decree, that would inform how these cultures behave.
Is it possible to have a fantasy along these lines with a materialist underpinning, or is this very idea of inborn powers anathema to that sort of approach?
i've been thinking about this lately, as well. it's very difficult. elves n orcs may have deeper origins in northern european folk mythology, but the modern version clearly comes to us filtered through tolkein, and let's face it the guy was steeped in british imperialism and white supremacy. much easier to lampshade it and subvert it, perhaps.
a big part of the problem, i think, is that the characters and their stories are often far removed from the means of production within the game world. it's hard to craft a world in which people are motivated by materialist interests when those interests don't really exist. the economy, such as it even exists, is based on capitalist realist ideas about money and pricing. nobody really worries about who's doing the mining, farming, and so forth that keeps these societies functioning, so the economy is always at a remove or two from the in-game action. monster lairs are filled with treasure for the taking, but that devolves into an accounting problem on character sheets.
and that's before considering how real magic would affect all of that.
so i think you need to start with the worldbuilding and try to imagine a materialist history. how do societies in this world train new characters? will a class-based system inevitably result in class warfare, with one or more of the classes coming to dominate a society and using their institutional power to oppress other classes? how do these societies create and distribute the powerful magic items that everyone wants? like, of course the paladins and witch hunters say that theirs is a battle against evil, but it's really about controlling magic items. the paladin's "detect evil" ability is a projection, an active ability the necessarily reflects the paladin's ideology back, and this ideology forms the superstructure of a settler-colonialist empire, perhaps. the real world paladins worked for charlemagne, after all.
after all, it's much easier to justify killing "monsters" and taking their stuff when you've convinced yourself that they're all ontologically evil.
and it's a role-playing game, so how to the players react to that situation? maybe the paladins of the empire of good are telling them to go kill the evil kobolds that happen to be living in the mountains of shiny magic rocks, and after a few generations of this the kobolds are ruthless in their confrontations with outsiders, relying on traps and their tunnel networks to maintain their resistance against an ever increasing number of "adventurers" who seek the sweet lucre hidden away in their homes.
tbf to tolkien, his orcs are very blatantly EuropeanEmpire-coded, sam and tom bombadil are brown skinned, rangers other than aragorn are dark skinned, every evil group other than Sauron/Saruman & loyal minions is said and/or implied to be tricked or forced into the service of sauron with promises that sauron won't keep--they aren't portrayed as evil for this, imperialism is explicitly and literally condemned even if for technological advancement / profit ("were you ten times as wise you would have no right to rule me and mine for your own profit as you desired"), there's (problematic, but super-progressive for the 50s where even many socialists were telling indigenous peoples they should just assimilate into Canada) ideas of landback for groups dispossessed by the "heroic" nations like Rohan and from very early on we have e.g. Gandalf saying we should feel bad for even his slave-soldiers (still have to fight them tho; can't kill imperialism with love sadly)
Orcs and Urukhai are the soldiers of the industrial-evil (Sauron) and industrial-market (Saruman) Empires and are portrayed as ontologically evil because they are loyal and relatively willing soldiers of an empire bent on slavery and/or extermination and gleefully carry out this extermination. Their mannerisms in this ("just following orders" "give me your number and i'll report this") and mode of laying out their camps (grid based, square buildings) also accord more with a modern euro style military than the "ontologically evil savages" most other fantasy portrays them as.
Orcs and Urukhai are not the conscripts such as e.g. goblins who are explicitly described as wanting to desert and flee back to their holes following the breaking of sauron's empire. A lot of text implies that the ontologically evil "races" in lotr are the result of the evil empires corrupting regular peoples who may be good or bad (e.g. Treebeard muses that Saruman might have combined Orc and Men somehow--the chapter before Ugluk says Saruman feeds them human flesh so this seems likely, ents are noted to look similar to trolls, and when trees wake up they can explicitly turn out bad rather than good). So rly imo we should look at Orcs/Urukhai in lotr less as "an independent society" and more as "commissioned officers of the british army", and goblins/trolls more as "conscripted troops in the british army who want to go home but will nonetheless commit attrocities bc of the racist society they've been brought up in"
fair enough. i should admit i'm not really a fan of his work to begin with so i haven't spent a lot of time with it and i'm probably biased towards an uncharitable read.