Yes, that is the benefit of federation, but the downside is that if a user is forcibly removed from participation in a community they liked, it won’t really matter that they created a new one if they can’t tell the users in the old community to migrate.

Well this is true - on an individual user level. But I am talking about a situation where a mod team (or even just 1 moderator) is so bad, so hated that enough of the userbase for that community get fed up - they could just make their own and use tools like !newcommunities@lemmy.world or !communitypromo@lemmy.ca to advertise what they're doing (this does work).

Obviously if it's just you aggrieved with how a community is run, you'll find it much harder. But that's true anywhere.

Speaking as a moderator (even though I don’t really do much on a low traffic community), if a mod bans specific users because they don’t like those users, that’s an abuse of power. But that abuse of power will largely go unchecked because it isn’t big enough of a problem for most users to take issue with, usually.

Oh absolutely, and it's not realistic to expect administrators of medium to high level instances to micro-manage and oversee all moderator decisions within their instance. But I imagine if you lost the plot on your !cars@lemmy.world community and started banning people for frivolous infractions, you'd be credibly replaced by a competing community in relative short-order and I would imagine its more likely that the lemmy admins would remove you eventually.