The extra inactivity from flags was a better idea. The problem is that you can achieve the same effect from no end of coins, shares, and other instruments where you have to do zero work
Those coins do not endeavor to grow a community and accrue value to the blockchain by spending money via inflation the way Steem does. If they grow just as well or better than Steem then it indicates the Steem model is a failure. Simple as that.
In reality this hasn't happened. Steem has far more users than most of those non-inflationary coins, with possibly a few obvious exceptions (possibly because even though there are certainly larger blockchain communities and blockchain with more value, their growth prospects are unclear). Certainly Steem's growth rate has been higher and its reach broader, and very likely little or none of that growth would have been achieved without distributing money through inflation ("come for the rewards...").
The goal of Steem is to distribute rewards to value-adding activities (this includes but is not limited to new users since they are value-adding by growing the user base). To the extent that the system rules allow stakeholders to recapture those rewards via self-voting and other individual extractive schemes, this is in part unavoidable but not intended, and indicate leaks that need to be plugged, directing the rewards back to actual value-adding.
If stakeholders by consensus believe that inflation is too high (i.e. there are insufficient available opportunities for value-adding activities to absorb all the money), then they can vote for @burnpost type initiatives which temporarily reduce it (treating burning aka inflation reduction as the highest value-adding activity currently available) or hard fork to reduce inflation.
If I can hold Steem and vote badly, or I can hold Bitcoin, Steem needs to be substantially more likely to do well than Bitcoin is for being on Steem to make sense, and the markets have certainly shown no evidence of that so far
You are right in that sense. Steem is dysfunctional and needs improvement. Whether the improvements proposed here would produce the desired result is debatable but ultimately the goal is greater growth otherwise as you say, just go buy Bitcoin instead. Doing nothing and watching it continue to underperform is dumb.