Home, in this fragment, is not an address. It is wherever "one fading trace / Of what was great and free" still survives. The opening line, "The world is now our dwelling-place," sounds like a loss, since it is the language of people who have been pushed out. Within a few lines Shelley turns it into a kind of wealth. The title tells us the poem is addressed to William Shelley, his son, and the "we" that runs through the lines joins parent and child in a shared, chosen homelessness. The phrase "contented exile" is the poem's boldest gamble, because it asks us to believe that being cast out can be something to feel at peace with.
The sound of the verse backs up that claim. Six of the ten lines end on the same "-ace" rhyme: place, trace, race, place, chase, face. The word "place" even rhymes with itself, in line 1 and again in line 7, and the effect is telling. The first "place" is a bare dwelling, while the second is a "happy place," so the same word has been transformed by the argument that happens between them. The lines are mostly brisk iambic tetrameter, light and walking-paced, which suits an idea of wandering. Then line 4 breaks the pattern. "That is our home!..." is shorter than its neighbours, it rhymes with nothing, and it trails into an ellipsis. Whether the gap is a missing line or a thought left hanging, the effect is a pause where the poem seems to take in what it has just declared.
The imagery is practical and physical. Exile will let them "reap" mild thoughts, as if gentleness were a crop that grows only in distance from other people. Those thoughts are reaped from "man's ungentle race," so the poem admits that humanity is harsh while hoping that a change of scene can soften the speaker's view of it. Then comes the rhetorical question that drives the second half: who, with "free thoughts" that he can "freely chase / By woods and waves," could "clothe his face / In cynic smiles"? Cynicism here is a costume, something put on to face other people, and nature leaves no use for it. The repeated "free" and "freely" make the point in the sound itself, and "chase" turns thinking into something playful, like running through open country.
The expected answer to the question is "nobody," but Shelley's actual answer is more surprising: "Child! we shall weep." The exclamation lands in the middle of the line like a hand on a shoulder. Weeping is offered as the opposite of cynicism, an openness to feeling, and the direct address makes it tender rather than bitter. It is a lesson from parent to child about what to do with pain. The speaker's ideal response is not to harden but to stay soft.
The second part is more broken, and the shortened lines look like a draft in progress. "This lament, / The memory of thy grievous wrong / Will fade..." points to some injury done to the child, though the fragment never says what it was, so the poem has to be read without that detail. The word "lament" also seems to refer to the poem itself, which promises that its own sorrow will wear away. Then the last lines turn: "But genius is omnipotent / To hallow..." and stop. The rhyme of "lament" with "omnipotent" sets human sadness against a claim of unlimited power. To "hallow" is to make holy, and the judging-by-the-text reading is that creative imagination can sanctify suffering and turn a wrong into something meaningful. What is hallowed, we never learn.
That unfinished ending is part of the poem's interest. Because it is labelled an early draft, we see Shelley's thought before it has been smoothed over, with its confidence and its gaps both on the page. The central argument is already clear. Freedom of mind matters more than a fixed home, tears are healthier than a sneer, and poetry has the power to repair what the world has damaged. Those hopes are typical of Romantic writing, and here they are addressed to a child, which makes them feel intimate rather than grand.