Calvin and Hobbes

Formative and summative assessments need metrics by which we can demonstrate successful learning objectives and the degree to which those learning objectives were accomplished. Theoretically grades are supposed to represent the degree to which a student's advancement between formative and summative assessments demonstrates a student's progress in mastery of the learning objectives. At their core, across all students they represent the successes and failures of the teacher, the learning materials and teaching methods. Provided that a significant number of students show sufficient success and the grading mechanics are not compromised, these grades are a reasonable approximation of an individuals progress through the learning objectives.

Now... Obviously there are just a plethora of problems in practice across educational institutions. Most schools abjectly fail at any form of reasonable formative assessment and compromised grading (favoritism) is rampant which results in systemic failure of adequate assessment (grading) mechanics and a next to complete breakdown of objective assessments throughout the system. This provides fertile ground for corruption from external pressures (school funding and management cronyism/job security). The result is systemic grade inflation.

When grade inflation is rampant, it provides an othering mechanic for the social hierarchies present in the institutions that is sufficiently backed by science to be unassailable by the average participant... Even though due to poor implementation it should be rather meaningless.