If the majority of the populace is happy with large, badly-moderated instances, more power to them. That doesn't mean the
very real people well-served by small instances with enforced moderation policies should have that taken away from them.
We only have problems when large instances get block-happy. There's some weird stuff going on in fedi admin circles, but so far, it hasn't been as harmful as (… think of a non-Facebook example…) Tumblr's centralised moderation decisions. This is mitigated by small instances, where heads are cooler and tensions are lower because you don't have everything to think about all at once, and individual moderation decisions are less impactful.