Child - Since the denizens of Middle Earth are supposedly "us" from an earlier time in pre-history, I just think the Good Professor was painting his cultures based on our own history.
Walled and fortified cities were a fact of life for most of human history. It was the best way to protect yourself, at least until the advent of the missile. Heck, the Chinese walled off half their country, and apparently, with good reason. (Dang Mongols.)
Remember that M-E was a land under siege, first from Morgoth, then Sauron. Not to mention that the three main races each had their share of dirty dealings when it came to their neighbors. So I'm sure that paranoia and xenophobia were alive and well in Arda, just as it was (and sadly, is) alive and well in our own world.
As for the Shire, their "walls" were created from pure isolation. The halflings settled in a land that had been emptied of Men through war and plague. If you look at the map of M-E, the country around the Shire is empty wilderness. And once you get on the other side of the Misty Mountains, Halflings become a myth. Again distance and isolation was a very effective form of protection in our own world for most of history.
As for King Elessar's edict against Men entering the Shire: I think "Strider" made an excellent decision, based on his own knowledge of history and his experiences. As peace came to Middle Earth and the number of Men grew and expanded into formerly empty lands, the Hobbits were bound to lose the protection of isolation. History shows that when "little folk" (either in stature or culture) meet "big folk", it is usually bad news for the Little Folk. As Tolkien suggests in "Concerning Hobbits", King Elessar's Edict did not last. Sadly, such edicts seldom do.
To sum up: Tolkien's "gated communities" and the fear and suspicion of the races towards each other only makes his characters seem more real and "human". It seems much more real than some of the modern fantasies, where different races of magical creatures just mix willy-nilly, a sort of mythical One World Order.
Now if that were to happen for real is our own world, it truly would be "magical".
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