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I have interpreted it less as “the hobbits are less powerful”, and more as “what would a powerful hobbit even want?”.
If a hobbit had all the power in Middle Earth, they would have an amazingly cozy hobbit hole with the best food and their parties and garden would be the envy of every hobbit and probably some elves and men. Hobbits don’t really have much interest in conquest, and their definition of dominance includes being well-liked or admired by those they dominate.
At least serial killers acknowledge how they got those trophies instead of pretending they stole priceless cultural artifacts and vandalized them to match their own aesthetics to “preserve and protect them” because the original owners would have just “squandered” those artifacts. (Looking at you, British Museum and your theft and desecration of the Elgin marbles.)