My students, writing on “La Belle Dame Sans Merci,” have all started with the withered sedge and the dearth of birds as symbols of desolation, which of course they are. But the landscape is not described entirely in terms of desolation. It’s desolate for the knight, but not for the squirrel. And someone is enjoying that harvest. It’s the opposite of “Grecian Urn,” where the townspeople are frozen in time on the pilgrimage to the sacrifice, and the little town is empty. Here the knight is frozen in place, forever unable to partake of the harvest.
This also suggests that the narrator is just passing through. He’s seen signs of the harvest before he gets to the barren place where the knight loiters. Real life and real nourishment aren’t that far away, but it doesn’t seem as though the knight is ever going to get to them…and it seems as though that’s his choice. He’s loitering. Did the word have the same connotations in Keats’ time? Apparently, yes. the OED quotes Sir Walter Scott in 1814: “Officers…loitered in the hall, as if waiting for orders.” The knight doesn’t seem to be waiting for orders; he’s already gotten them from the pale kings and princes. Don’t bother to try to go anywhere.
The knight is in thrall to his world between illusion and reality. The sedge is withered, not because he’s in a place of perpetual barrenness, but because the harvest is done and winter’s approaching. The traveler knows this. He is presumably going to keep going, on to a farmhouse where he can get some good bread or other fruits of the harvest. And he seems to know that there’s nothing much he can do for the knight.