It would seem unfortunate to divide the people of a democracy into two hostile camps; to encourage habits of thought which engender prejudice and bitterness on the part of one-half of our citizens toward the other half; to accustom the people to regard public questions largely from the standpoint of partisan considerations rather than upon their individual merits; to make it difficult for those who belong to opposite parties to forward in an effective way some particular measure on which they are agreed; to divide the support of public officers who seek to secure the impartial administration of the public business; to make it difficult to present an issue to the people save through the devious methods of party politics and through the utterances of party platforms whose purposes so frequently are to conceal and to evade, in the interest of party expediency; to develop opportunities for chicanery and corruption, and to foster the designs of dishonourable and selfish political leaders who trade upon party loyalty.
Hughes had already admitted that national parties were a necessity in order to give the President of the United States majoritarian legitimacy, but he'd expressed surprise that American politics since the Civil War had settled into a consistent Bipolarchy of Republicans and Democrats despite serious divisions within each major party. It was time for him to decide whether that was a good thing. Having made the case against Bipolarchy, he now took up the other hand.
[W]e cannot have the advantages of a situation without its disadvantages; and the former in this case greatly outweigh the latter. Division of political opinion is inevitable, and it will exist with regard to all public questions of importance. It is essential that there should be some means of focusing controversy and of providing a main line of division. If instead of two great parties we had a large number of little groups, each intent upon its own shibboleth and pressing its own candidates and policies, we should have a series of triumphant minorities, little or nothing would be settled, and the progress and prosperity which depend upon stability of government would be impossible.
Something doesn't follow. How can we have triumphant minorities when any minority must compromise and form coalitions with other minorities in order to win majority power? Hughes seems to have lost track of Madison's vision from Federalist No. 10 of how representative government would work, but he may be thinking specifically of presidential elections and presuming that multiparty elections would invariably go to the House of Representatives. Even then, however, the three candidates who'd advance would have to make compromises with state delegations in order to win their collective votes, so the menace of the shibboleth-driven triumphant minority seems minimal.
Hughes then goes on to idealize the two-party system. He claims that "While the people are divided mainly into two parties, it is also true that in their general intercourse and through the organs of public opinion, particularly when there is no dominant issue, views are freely promulgated and a general sentiment is created which does not recognize the limitations of party boundaries. Such sentiment has its weight in party councils and much is accomplished through its existence, although it may not present an issue to be definitely passed upon in a political campaign. Through the instrumentalities of great parties the people generally do express what is uppermost in their minds."
This claim begs the question of whether individual views would be less "freely promulgated" in a multi-party system, but Hughes may mean only that views are promulgated with sufficient freedom in a Bipolarchy to render objections insignificant. But he conditions that freedom on the lack of a "dominant issue." It's somewhat unclear whether he refers to the promulgation of views across party lines or within each party. Either way, however, Hughes hints that a "dominant issue" could both embitter interparty discussion and hinder intraparty debate. If we think of the present day and propose "liberalism vs. conservatism" as the dominant issue, the limits of Hughes's idealized portrait become starkly clear.
Nevertheless, Hughes adheres to Bipolarchy as a national necessity. While Madison predicted that geographic expansion would make more voices heard in government, Hughes concludes that a continental nation requires fewer voices to be heard.
The widening scope of national administration and the growing importance of the office of Chief Magistrate which represents the entire people and not simply a State or district, makes it of first consequence that candidacies should be limited, and that the President should rest his title upon a suffrage closely corresponding to an actual majority of the electorate. This can be accomplished only through great parties. It is not consonant with human nature that such parties should be expected suddenly to emerge and as quickly to disappear. Their tendency to continue reflects the conservatism of the people and the practicality in the conduct of government which gives assurance of permanence.
Bipolarchy is a consequence of geographic expansion (along with population growth) and the growth of presidential power -- Hughes spoke less than a year after Theodore Roosevelt left the White House. In effect, Hughes has propounded a historical theory of inevitable Bipolarchy, the alternative to which is simply inefficient. At this point in the lecture, however, Hughes knows that he hasn't convinced everyone of the necessity of Bipolarchy. In the final section of the Third Dodge Lecture, he'll attempt to convince persistent independents that they can best serve their country, as apologists for Bipolarchy have argued ever since, within the two-party system.