The High School I attended actually had two different failing grades: E and F. However the E wasn't assigned just as a feel good. Students who made E's were allowed to make up the course in summer achool. An F meant that you needed to take it over from scratch if you wanted credit for the course.
My school had something similar. An F meant a loss of credit (-1 on the GPA) and it may not be made up in summer school. It indicated a lack of effort.
That's inhumane.
It's inhumane to punish people for not doing their jobs? (in the case of students, their school work)
That actually sounds like a good system to me - it differentiates the people who honestly are just having a hard time with the material from the people who just plain don't give a crap.