I know that this opinion will be met with much resistance, but I actually believe in standardized testing. Though the system is fraught with problems and likely does not truly represent a student's ability, to me there is not another viable option.
Parents and the government have the reasonable expectation that only qualified teachers should be in the classroom. Also, as the poet George W. Bush once put it, they consistently ask, "Is our children learning?".
The best way to achieve these goals is to set up a "standard", and then test for it. Any other measure of success is going to have larger issues and implications. Already, some schools better prepare students for the exam; if standardized tests are replaced with a less formalized method, this inequity can only increase.
In all, standardized testing is a problematic system, with many faults. Researchers feel the tests discriminate against minorities, and instead of actually teaching, many instructors "teach to the test". Given that, it is still the best way we currently have of judging what goes on in the school.