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Wouldn't the small sharing libraries also be at risk under a system with more power held by copyright owners?

No copies are being made, so no. Keep in mind we're talking about physical books, not filesharing.

Of course there are no physical restrictions with books, but legal restrictions can be created at any time.

Just imagine physical books suddenly having EULA-like first pages that would forbid you from loaning them out. In fact, this has been tried before: https://law.stackexchange.com/questions/2059/why-were-books-...

Insofar as copyright owners are empowered by the system currently in place (e.g. DMCA) a system with less authoritarian power available to lobbyists may have the exact opposite effect. Same caveats as above apply.

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