You are absolutely right - the big fish eats the smaller. This is a fact in the real life as well as in steemit. So, flagging should be only used for plagiarism, violence or something else that undermine the (unwritten) rules of a modern society. but there must be a possibility to stop the abuse of flagging. This is not the case at the moment! There must be clear rules when a flag is used too extensively. Somebody who flags down a person of a high rep lvl to "dust" must let an internal alarm system BURN! It should be impossible to destroy the reputation of a member within seconds.
Pls correct me if I am wrong, but for flagging could be an extra timeout installed maybe?
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Maybe there should be a limit to how much a certain person can damage another one's reputation. By doing that, flagging someone down would really be a community effort.
Then again, there are communities of spammers (!) with significant reputations who could counter a flagging of one of their own...
It's really tricky.