Although they are often not the most precise way to measure a particular student's progress in school, letter grades do serve an important role. Grades help both a student and his or her parents understand where the student's progress is compared with other students in his or her class, and give students something to strive for.
The grading system may work in theoretical subjects like maths and physics, where students can make MEASURABLE mistakes. But in any subject that involves creativity, like languages of any kind, it must fall short, as there is no objective measure for quality. Would Hemingway get good grades for his works today? I guess not, because he propagated alcoholism. He would probably be sent to see the school's advisor.
Shakespeare would fail English class, because of his over-elaborate, hard-to follow wordplays.
Grades handed out by a teacher tell us only about the relationship between the teachers and their pupils. Grades should be substituted by a system of recommendations which career path to follow. This would mean true motivation, as there is always something to look forward to. And isn't that the reason school exists? To help young people decide a career path for them and give them the tools necessary to pursue it?
I do not believe we should continue to use letter grades. For one, they lower a student's self esteem. We all have bad test days or a lot going on in our life at a specific time. Why add more stress for students to compete with one another. Instead, why not assess student's learning in a more meaningful way by having them reflect on progress they've made and areas that need improvement? This may be a much more tedious process for the student, but s/he would learn more and it would eliminate letter grads reinforcing the class divide and allow students to be more creative.