Tolkien never labeled himself a member of one party or another in England, though he seems to have favored the conservatives more than labour. He did, however, reveal his own politics rather forcefully. "My political opinions lean more and more to Anarchy (philosophically understood, meaning abolition of control not whiskered men with bombs)-or to 'unconstitutional' Monarchy," Tolkien wrote to his son Christopher. "I would arrest anybody who uses the word State (in any sense other than the inanimate realm of England and its inhabitants, a thing that has neither power, rights nor mind); and after a chance of recantation, execute them if they remained obstinate!"
Monarchy and anarchy would seem to be diametrically opposed, so it's strange that someone could reconcile a preference for either one or the other.
And the irony of his statist desire to arrest statists is either amusing, or alarming--take your pick.
They would seem diametrically opposed, if he had not diagrammed for us so beautifully how he imagined life to be in his world in Lord of the Rings. The Shire has no real government or system of government, just folk going about their daily lives. Theoretically, the Shire and all lands would be within the Realm of the King, but there had been no king for many years and people were doing just fine. I think Tolkien felt that good people needed no government to be good people. From the sound of this, Tolkien felt the "planning" of society, the bureaucracy of meeting and law writing and controlling the behavior of society was at least a bore and an interference, and perhaps annoying, and probably always led to dominion and slavery type of mindsets - people became cogs in a machine they could no longer control.
But the Shire rarely needed to organize and take up arms against an opponent, and therein may lie the difference.
In the more battle threatened regions of Gondor and Rohan, governance is only mentioned when it comes to service in battle and making defences - armies and soldiers are the only government actions I can recall, besides one: After the final war against Sauron, Aragorn declared by edict that the Shire would remain free from interference from the KIng, or anyone else outside it. In Tolkien's world if a land must have leadership, the Kings are worthy and benevolent, and have less irritating red tape, "planning" and silliness in people's daily lives than a democracy.
I tend to find all of this amusing rather than alarming. Tolkien had a romantic vision that diagrammed the best and worst about people, and he painted it for us in words, probably knowing that it could never be, but loving the vision anyway. It worked in the simple times of Middle Earth very well!
Perhaps he was trying to show how very foolish - and dangerous - statism can be. Reducto ad absurdum, if you will.
It seems likely to me that he was just joshing with his son. As you pointed out, the principles he was espousing, and the actions he was 'suggesting' are totally contradictory.