It's just assumed that most people are honest about their work and the who aren't will be swiftly punished. But in most cases, it's the opposite: the honest people get driven out because scammers can promise the world for a penny because they know they will never deliver.
People were fed up with being swindled left and right, so they decided to get the government to step in. Obviously, they've been highly successful because Libertarians can't even imagine the world as it was 100 years ago.