All the points made by China Miéville (January SR) about the reactionary outlook underpinning the imaginary world of Middle Earth are spot on, and 'The Lord of the Rings' is certainly not the greatest book of the 20th century.
Nevertheless, as it stands China's critique leaves a problem because it doesn't explain why this deeply conservative fantasy should have proved so enormously popular both with 60s hippies and many people on the left. I think it is because Tolkien's world view, like the feudal socialism described by Marx in 'The Communist Manifesto', does present a critique of capitalism--albeit a backward-looking one.
In the political and economic spheres this pining for the purity of the Middle Ages is completely impotent. But in the literary sphere it can generate quite powerful effects and exert a strong appeal. Examples range from the poetry of the Romantics, reacting against the industrial revolution, to the elitist modernism of Eliot and Pound, and, in popular culture, the 'Star Wars' films. It is also an element in the poetry, art and writing of William Morris.
To understand this one has to grasp the dialectical point that although the overthrow of feudalism by the bourgeoisie was historically progressive, there was a certain loss involved in the destruction of all 'feudal, patriarchal, idyllic relations' and the reduction of all social ties to the callous cash nexus and the free market. And in the sphere of literary fantasy it is possible to mourn this loss, as Tolkien does, without any risk of restoring real medieval conditions.