Reddit is an anarchist experiment. No centralized filtering except where external laws are clearly being broken, and even then only in the most extreme cases of violence or exploitation (e.g. child pornography).
Whether that is a good thing or a bad thing is worth debating. But it absolutely must be said that the anarchy defines what Reddit is. With active moderation, it won't be Reddit, it'll be something else. Maybe that something else will be nicer, friendlier, or whatever. But it will be filling a different need.
People who defend the hands-off Reddit are not advocating in favor of racism (to use your example). They're saying, essentially, "a discussion forum with absolute freedom of expression has value, even if (unfortunately) that lack of controls means sharing the site with racists."