I disagree with a lot of what you're saying, but I'm on mobile right now and to write a full response would take the better part of this year. That said, I do have to respond to this . . .

Since the moderator only has localized power, corruption is minimal, and since they do have localized power, abuse is also minimal. To expand from that smallness, remember that there are often multiple small communities with a similar focus, with some number of overlapping subscribers, but completely unrelated moderators.

Uh, no. There are totally power hungry mods that mod multiple subreddits, sometimes related sometimes unrelated, that will not hesitate to ban you from every subreddit they control if you cross them. The mods can be just as goonish, if not worse sometimes, than regular users.