Where I'm from (Nova Scotia, Canada) the minimum passing mark is 50%. Here in Maine, it's 70%. At first glance, it seems like students are being held to a higher standard, but in reality the kids simply receive easier tests and assignments so that few or none of them get low marks. A 70% pass makes it harder to encourage struggling kids to put more effort into their studies (what student will believe hard work pays off when her score of 16/20 earns a C grade?). It also makes it harder to convince high achievers that it's OK to take risks and make mistakes (the two best ways for gifted students learn to think critically and self-critically) when a 2% loss drops their scores a full third of a letter grade. Most gifted kids are smart enough to see "the game" for what it is, but they are less likely to experiment with changing the rules or pushing the envelope if their college applications are at stake.
Now, I'm no information theorist, but it seems to me that a complex informational entity (e.g. what a given student has learned over, say, a 5 month period) can be more subtly and accurately represented by 50 smaller units of information than by 30 larger, more blocky chunks of information, just as a greater number of smaller pixels can draw a more detailed character in a video game. There is an elementary concept at work here that even a mathematical ignoramus like me can grasp.
When the minimum passing grade is high, educators have 2 options: they can give out more failing grades, or they can make the work easier. Since more failing students cause a teacher to have to deal with more headaches and meetings after school with concerned or angry parents, I'd be willing to bet a lot of teachers just inflate grades (Sally's project was great so she gets 105%, but Leon's was mediocre so he only gets a 92%) and dilute the curriculum (What are 10 things about Japan that everyone in the class will be able to memorize at least 7 of?).
According to the principles of "differentiated instruction," it's practically undemocratic to fail a student anyway.
After spending some time working in public schools, I am seriously considering sending my own children to private schools, if and when I can afford it. These may well breed elitism, but at the end of the day I'd rather my kids end up elitists than complacent illiterates.