What's really ironic about this paragraph is Middle Earth is a setting of despair, where things are not fundamentally good, and in fact it is a world of darkness and hopelessness and greed and evil is the prevalent state of the world.
I'm not sure the text actually bears that out. There are problems in Tolkien's world, yes. But most of the folks in it are not yet in a state of hopelessness and greed and evil - the Dark Lord hasn't
yet spread across the land. The people have not yet given in to despair.
People tend to forget in that bright spark of hope just how freakishly dark Tolkien's setting and story actually is. The triumph at the end is what he calls a "eucatastrophe" - unearned and unreasonable victory that happens in the midst of darkness.
He may call it that. But he
also presents us with a story in which a common person - a hobbit, the stand in for his beloved bucolic common Englishman, saves the day, and the power who set that commoner in motion pretty much
knew he had the strength for it. He presents us with a story in which whenever a leader says, "Folks, it is time to go fight evil!" the people do not give up - they stand up, every time. That's not despair, by any measure.
What some folks may be missing here is that "Hope" and "Despair" are
NOT about the current state of affairs. They are about people's
attitudes toward that state. The world being dark, and full of greed and evil doesn't make a setting one of Despair. Indeed, the only place where Hope can show itself is
within darkness. If everything is hunky-dory, and everyone is already happy, hope really doesn't enter into it - hope is unnecessary when happiness is a foregone conclusion.
You resist despite the fact that there is no rational reason to believe you can win, not because this is a cotton candy world with occasional sour spots.
Yea, so... what do you think hope is? Hope is not cotton candy. It is not, "Tra la la! Life is good! Oh, wait, I've got a minor inconvenience, but I am pretty sure I can overcome it."
In LotR, in every major action - Helm's Deep, Minas Tirith, the Morannon - the forces present are not sufficient to actually win the battle, and they know it. Each time, the forces hold on and keep fighting as long as humanly possible (kind of literally) despite that. On this we agree. The question is... why do they persist?
We can perhaps understand by contrast, looking to the one character in Tolkien who falls into despair - Denethor II, Steward of Gondor. Tolkien wrote:
"He [Denethor] must have guessed that the Ithil-stone [Sauron's palantír] was in evil hands, and risked contact with it, trusting his strength. His trust was not entirely unjustified. Sauron failed to dominate him and could only influence him by deceits. Saruman fell under the domination of Sauron... [while] Denethor remained steadfast in his rejection of Sauron, but was made to believe that his defeat was inevitable, and so fell into despair. The reasons for this difference were no doubt that in the first place Denethor was a man of great strength of will and maintained the integrity of his personality until the final blow of the (apparently) mortal wound of his only surviving son."
So, Denthor became convinced that not only could he not win, but that he'd have no legacy, and finally gave up, and burned himself n a pyre. Everyone else, then, holds on to some fundamental feeling that giving up is not the right thing to do.
Tolkien was adamant that he was not writing allegory, but his work is powerfully informed by his personal beliefs, and his own experience in war, that if you hold on,
providence will provide. And in the work, providence does provide - the huorns show up, Eowyn strikes down the Witch King, and the One Ring falls into the fires of Mount Doom. Broadly speaking, if people hold on, they will be saved, somehow. That feeling that holding on might still be worth it, somehow, that is hope.