As it happens, I'm currently researching the lives of pulp writers that lived around that time, including H. P. Lovecraft (1890-1937) and Robert E. Howard (1906-1936), so I can maybe answer that by focusing on Lovecraft as an example of a turn-of-the-century person.

Racism and discrimination were ubiquitous in the United States at that time. Segregation was law and a common part of everyday life; stereotypes regarding race, ethnicity, nationality, and religion were in everyday use; scientific racialism was extremely common, though it was being challenged; the second incarnation of the Ku Klux Klan rose and flourished. Lovecraft gives one description of segregation during his lifetime:

I was greatly interested in your notes on your section, & especially in the amazing social recognition accorded to negroes. This latter is unheard-of in the east. Up north negroes use the same vehicles & waiting-rooms as whites, & are allowed in the cheaper restaurants & cinema shews, but never have personal associations with whites except on a master & servant basis. They are tacitly barred from the higher grade of restaurants, theatres, shops, & Pullman cars. Down south here the colour line is absolute—a virtual necessity because of the vast black population. Niggers sit on the rear seats of cars & buses, use the gallery of all theatres, have their own parks & eating places, & are restricted to special “Coloured” waiting rooms in stations. Even the cheapest lunch rooms of Charleston are all-white in clientele. Whenever I’ve been south a long time & come back north, it makes me shrink a bit to have some big buck nigger sit down beside me in a car or waiting room. Washington is the most southerly place without a strict colour line. Baltimore, farther north, draws the line tightly. In the public parks of the South there is varied usage—usually determined by custom—regarding niggers. Richmond is very liberal—blacks being allowed in all the parks. In Charleston, the Battery seems to be all-white except for the black nurses of white children & for beggars who move on continually. In City Park—by the 1769 statue of William Pitt—niggers are freely admitted, but they always take benches apart from white people. Old southern towns like Charleston have worked out the relations between the races pretty well; & there is no friction as in the inner or “deep” south. The blacks know their place, & the white people behave very kindly & considerately toward them. I never saw a Southerner insult or affront a nigger.

• H. P. Lovecraft to F. Lee Baldwin, 29 Apr 1934, Letters to F. Lee Baldwin & Others 78-79

Lovecraft's description is interpreted through his own lens of prejudice, but it goes a little way to show deeply engrained segregation and discriminatory attitudes were during the period. Even the casual language he uses would be considered extremely offensive today.

But was everybody racist? There were certainly many folks who opposed segregation and discrimination. Lovecraft is forced into long arguments in his letters with friends like James F. Morton, who was an early member of the National Association for the Advancement of Coloured People and author of a pamphlet titled The Curse of Race Prejudice (1906). Morton may have held some inaccurate views on race due to the scientific consensus of the period, but he was certainly aware of discrimination and was active against it.

Racism isn't just fear and hate, it isn't just prejudice and discrimination, whether codified in laws or sudden outbursts of extralegal violence as in the Massie Case (1932) - though those are all part of it. It's a spectrum of different beliefs and behaviors which have as their effect the idea of race, and the prejudice and discrimination of others for perceived differences. In that sense, everybody back then was at least a little racist, and everybody today is at least a little racist. We still "see" race, even if we know that it's a social concept rather than a biological one, and we still feel the effects of stereotypes and discrimination.

Does it need to be pointed out? Where it is relevant, and in the context of the era, yes. Case in point with Lovecraft, in one of his stories, "The Rats in the Walls" (Weird Tales March 1924) contains a black cat named "Nigger-Man." This has caused many raised eyebrows, because the N-word is pretty much verboten today. In the context of the era, however, it's important to remember that while the "n-word" still had pejorative connotations, it was also still very much in common use; the "N-word" was not an unknown or uncommon name for a pet during the period; there are accounts in his letters where Lovecraft in particular called any black kitten an "N-word," without any particular malice or pejorative intent; and finally the specific cat featured in "The Rats in the Walls" is based on and named after Lovecraft's own cat, who had disappeared into the night in 1904.

Lovecraft was racist. This specific instance, which people tend to harp on more because they're more likely to encounter his fiction than his letters, is not an example of his prejudices surfacing however - especially not when taken in context. It is an example of racist language being ubiquitous during the period - this was published as-is in 1924, without the editor even blinking at the name, nor any published comments from the readers of the period. Because we are reading it today, and because our context has changed, we may need to explain that to people, especially when it's liable to be misinterpreted.

You may notice I've been working hard on understanding and context. Lovecraft's beliefs, words, and actions were shaped by his era, but that does not mean that in that time and in that place he could not have acted or believed or spoken differently, even as his friend James F. Morton did. This is perhaps an apologetic, but it is not an apology; Lovecraft was as he was, and he was racist. The fact that many other people were also racist in the period doesn't excuse that, it just might help to explain why racism was more openly accepted, and even fostered. I also do not try to judge or demonize Lovecraft for his racism - the man is dead; he's not beyond our evaluation, but he cannot recant, he cannot learn better, he cannot make amends. What is left for us today is to try and understand his life and works - what he believed and why.

Much of what he believed, and what many people at the turn of the 20th century believed, was not true - not by our understanding of biology, anthropology, and evolution today. People like Lovecraft used that misunderstanding, that scientific racism, to support the prejudices he had already developed relatively early in life.

We still hold with some of those misunderstandings today - as you might have seen in any comic book where a modern human is "evolved" into a bald, big-foreheaded mental giant, or "de-evolved" into Neanderthal or an ape. These are ideas or concepts that have their root in turn-of-the-century misunderstanding of evolution, as popularized in fiction like pulp magazines, science fiction novels, and comic books. Or in fantasy fiction, where we blatantly talk about different "races" like elves and orcs.

So yes, it should be pointed out and explained, where explanation is needed. Judgment, however, should be reserved - every historical person has a context within which they lived, thought, and acted. We can explain without condoning, show the ramifications of what they did without reducing a complex human being into a caricature summed up with just one word.

One of the big problems with dealing with this subject is that racial prejudice still affects people today. People can still be hurt by it. Labeling an individual as "This guy was just a racist." however, does not eliminate a source of prejudice; it just denigrates the historical individual without understanding.

H. P. Lovecraft was a racist - but he was not just a racist. He was prominent in amateur journalism, he struggled as a pulp writer, he was a keen and enthusiastic letter writer and observer; he was always willing to lend a hand, and encouraged the art and fiction of a number of writers, of various ages, gender, and background. That, more than anything else, should be his legacy. He was also a racist, and that should not be forgotten or downplayed. But it was one part of his life, not the whole of it, and our lives today are richer for what he said and did than they would be otherwise.

The extraordinary /u/AncientHistory has done great work here. I can add a few minor observations: it's always a touchy matter to judge people from the past, and yet some historical characters were such overachievers in the realm of being creeps that it is hard not to pass judgement on them. In the process of evaluating people in the past, we need to be careful to judge them - if we must - in the context of their time.

I once heard a grad student give a history conference paper, which came to the conclusion that Mark Twain was sexist. I would challenge anyone to find a North American male born in 1835 who was not sexist by modern standards. It is simply unfair and not a particularly useful conclusion to call out someone like Twain in this regard. If we could demonstrate that Twain was a misogynist that was extraordinary and gained the attention of his contemporaries, then we have something to sink our teeth into, but the grad student did not demonstrate that; she simply "proved" that by modern standards, Twain was sexist.

I think we can run into the same problem when it comes to racism. By his contemporary standards, Twain wasn't particularly racist (although he did maintain considerable vile toward Native Americans). For his time, he was practically enlightened, and yet he was certainly racist by modern standards. Clearly someone like Hitler was, in fact, that sort of proverbial over-achiever when it came to his views - and actions - with regard to racism. Even his contemporaries were put off by him. I'm sure we could demonstrate that by modern standards, all of the world leaders during the rising of Hitler were also racist and anti-Semitic. The question is really whether they were stand outs in that regard and for their time.

We might be able to argue that most North Americans and most western Europeans today are racist in some capacity, simply because they take notice of a darker skin tone more than they would whether a person's hair color were light or dark brown. Simply noticing that sort of thing implies that skin color is part of the evaluation of people - more than hair color. I hope, honestly, that people fifty years from now will look back on North Americans and Europeans today and conclude that we were outrageous racists - because that will mean that there has been some progress . You and I may protest and insist that we do NOT use race as a way to evaluate people, and that someone like David Duke is a true and outrageous racist by contemporary standards, but we can hope that our descendants will be further cleansed of the tendency to see skin color as a way to understand people, even if that process for most of us does not result in racist conduct.