Check out this neat online tool for graphing grade inflation over time at a large selection of US universities. It comes courtesy of fan and reader Steven Ranney. Thanks!
It is naive to suggest that this is entirely a recent phenomenon; the "Gentleman's B" has been a punchline for decades' worth of jokes about Ivy League schools. The academic perspective on this – feel free to chime in if I'm off base here – is that everyone recognizes grade inflation but feels powerless to stop it. In my limited experience, there is external pressure as well as internal pressure to give higher grades than students' work deserves. We are put in a difficult position, yet part of the problem is us.
The external pressure at the college level comes from two sources. One is the grades students received in high school, which are even more wildly inflated. The modal American high school student is so academically indifferent that any student who actually completes the assigned work and masters a few rudimentary aspects of each subject is given A and B grades. In their defense, K-12 educators face constant pressure from parents to give their special special snowflakes the high grades they deserve. College professors have the unbelievable luxury of being able – legally required by FERPA, actually – to refuse to deal with parents. The second source of pressure comes from other professors within our institutions. We all know the faculty who are either Pollyanna-ish or completely checked out mentally and end up giving every student who enrolls in the class an A. When Professor X gives the students an A in English Comp despite the fact that they are completely unable to write a sentence in the English language, how am I going to give them an F, Or even a C, without getting an avalanche of complaints? When the tide keeps rising, it's very difficult to keep the boat anchored to the seafloor.
The internal pressure comes from the fact that when an entire class's performance is comparable in quality – and if that quality happens to not be great – it feels "wrong" to give an entire class a C. The voice in your head starts telling you that you're being a dick and you should give some A's, which you end up doing for whichever students performed a little better than the rest of the pack. And let's not kid ourselves either. Colleagues, Deans, and other people in the university who evaluate us are definitely going to raise eyebrows at entire classes full of C and D grades. Inevitably they are going to ask what I'm doing wrong, why I'm such a bad teacher that all of my students got C's. Personally this has never happened, I've always had normal grade distributions in my courses. But I know other faculty who have had this problem. The assumption is never going to be that none of the students did work that merited an A. It will always be assumed that the person in charge of the class has failed somehow. Sometimes that's a fair point. Sometimes you just get a batch of students who give zero shits.
Grade inflation has gotten so silly (take a browse through some of the schools on that list with mean grades in the 3.5 range) that it can't continue forever. A common complaint about graduate programs is that they obsess over standardized test scores. This is accurate, and it is a direct result of undergraduate GPAs becoming nearly meaningless. As for what to do about it, your guess is as good (and most likely as unworkable) as mine. All I can control are my own classes, and despite my reputation as a Harsh Grader I'm feeding the problem too.