You say that all villages are segregated so that makes them racist, but lets see how much you would trust someone outside your village if you were living in an age where bandits could mess your crap up any second, why would a, say human, want to live with the dwarves? and im pretty sure that there are humans living with the elves and also the wildmen use to be at war with Rohan and rohan won and drove them out making them wildmen and originally they were "Uncultured and superstitious, they were wary of the tall men who came out of the west, and came to fear and hate them" . And the "Arabians" were actually a people from an outside country wanting a stake in Middle Earth. And also orcs use to be elves but were tortured so much that they became "twisted", and they kill each other (including urak hai) so i doubt they would want world peace.
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"war has changed. its no longer about nations ideologies or ethnicity, its an endless series of proxy battles fought by mercenaries and machines. War, and its consumption of life - has become a well oiled machine" - Solid Snake
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