Privileges are exponential – not incremental – for those who could move up the pecking order. That's one fact of human society. Or so I'm told. (The decline – when one falls from grace – is also far from being graciously gradual but more like falling off from a cliff. Speaking of human society in general, of course).
When it comes to downvote/flag, it should be exercised with proper communication and caution – one cannot LAZILY assume every user to be well-versed, from A - Z, of all the right and wrong. The road to hell is paved with good intentions, as they say.
At the end of the day, Steemit is a platform for human persons. So, that what is true for the ecosystem of human persons may also hold true for Steemit. This is the simpliest assumption that one can make? I don't know if I'm veering off from the topic, LOL.
To answer your question (i.e. title of blog post), I will say that it's not an either-or, of the two. It's a little bit of both. :)