"...everything alive come aout o' the water onct an' only needs a little change to go back agin."-- Zadok Allen.
"Complaints from many liberal organizations were met with long confidential discussions, and representatives were taken on trips to certain camps and prisons. As a result, these societies became surprisingly passive and reticent."-- the narrator of SHADOW OVER INNSMOUTH (given the name "Robert Olmstead" in HPL's notes).
During my early enthusiasm for Lovecraft's works, I didn't tend to reread SHADOW, in marked contrast to the more imaginative "cosmic horror" stories. For that reason, to the extent that I thought about SHADOW in terms of the author's avowed racism, I might have even accepted the reigning critical opinion of the tale, apparently shared even by annotator Leslie Klinger. That opinion, drawn from HPL's own political writings, asserts that the horror of SHADOW-- of a repulsive race of fish-people, the Deep Ones, who intermarry with humans to produce hybrids-- was a one-on-one recapitulations of HPL's unequivocal distaste for almost anyone who was not of purebred English stock (including several dominantly Caucasian nationalities, like Italians and Poles). The two quotes above, however, suggest to me that HPL was aware that such a complexion could be placed upon his story, and that he took pains to tell readers, albeit indirectly, "no, my fish-people are not just allegories for ethnicities I don't like."
Like CALL OF CTHULHU, SHADOW starts with an ordinary man who encounters strange phenomena that initially seem merely curious, but which eventually reveal the existence of alien conspiracies of which average society knows nothing. Unlike CTHULHU, SHADOW's opening posits that narrator Olmstead is able to alert the government to the existence of the conspiracy, resulting in a wholesale pogrom against the conspirators in the Massachusetts sea-town Innsmouth. Then, as in CTHULHU, the narrator tells us all the backstory of his horrific experience, in which he discovered that most of the inhabitants of Innsmouth were hybrid descendants of intermarriages of human beings and sea-dwelling fish-people (who are said at one point to worship Cthulhu).
I won't dwell on the many ways HPL sells this concept via his excellent attention to detail regarding the history and physical layout of Innsmouth, since that would be impractical for a blogpost. Most of what Olmstead learns about Innsmouth comes from a 97-year-old Innsmouth resident named Zadok Allen, whose tongue Olmstead loosens by giving him liquor. Old Zadok was around as a child when Obed Marsh, one of the town's leading citizens, began trafficking with certain islands in the West Indies, and so essentially "colonized the colonizers," to play upon a current political buzzword. But because other residents of the polluted town see Olmstead talking to Zadok, they come after Olmstead. One doesn't normally think of HPL as an exciting author, but Olmstead's daring flight from Innsmouth, first by leaping out of his upper-floor apartment and then pretending to be one of the hybrids as he makes his way out of town on foot, is viscerally memorable.
For an HPL-contemporary like Seabury Quinn, the violent suppression of a conspiracy would have been the end of the story. But the kicker to HPL's story involves Olmstead-- whose mother was of "Arkham stock"-- being much more intimately involved with the spawn of Cthulhu. And this is the great conundrum alluded to in the first quote: that as much as humans may want to believe themselves the lords of creation, they come from the dark abysses of the primal waters, where everything flows into everything else.
Now, in CALL OF CTHULHU, HPL implies that people not from Anglo-Saxon ethnicities may be degraded enough to traffic with unholy cults. Yet in SHADOW, the ones who surrender Innsmouth to the Deep Ones are the members of the town's "gently-bred" (HPL's word) families. Zadok tells Olmstead that although the spawn of the Deep Ones inhabited one particular island in the West Indies, he also mentions that the "Kanakys" of other islands despise the hybrids and eventually wipe them out, the same way the government in 1927 tries (but fails) to wipe out Innsmouth. Lastly, in one of Olmstead's most close-up descriptions of a fish-man resident, he observes that the man seems alien even though he does not look "Asian, Polynesian, Levantine or negroid." While SHADOW certainly is not "anti-racist" in the modern meaning of that term, it also indicates a different mindset from 1928's CTHULHU-- for reasons that will probably never be known.