Kids don't need bullying. They don't need constant reassurance that they are wonderful. They don't need severe abuse when they fail.
But they do need constant challenges which are mostly achievable, with a few that aren't. They also need limits on their behaviour - as long as they're reasonable, fair, adult limits, not capricious authoritarian limits.
I suspect the underlying problem is the emotionally brutal and insanely competitive environment in schools - not just in academics or sports, but in "popularity" and status.
Promoting self-esteem is the wrong answer to that problem. The culture itself has to become more cooperative and less emotionally violent, and that's hard to do when it's a fair reflection of much of the adult culture around it.
Things didn't really click for me until I had a series of teachers who recognized that I was doing well and treated me like a person who was actually interested in learning.
I wasn't even an extreme case in my school system. One kid, who was generally regarded as the smartest kid in the school, got caught basically turning an SAT scam into a business. Ended up getting multiple Ivy League acceptances reversed. He didn't even need the money, he was just bored and liked the popularity that came along with doing SATs for the cool kids.
I got a bunch of participation ribbons as a kid, but I certainly don't think they were anything more than a symptom of actual problems. There was a weird, pervasive unwillingness among adults to admit that maybe I was good at some things, and at others, and capable of improvement. I might have benefitted a great deal from someone telling me things like "Your art is bad, and you could get better if you tried to. Also, you're best-in-school smart, not best-in-world smart, there's a difference and it's a good reason to work harder."
I did eventually get that from some outside-of-school competitions, but it's weird that school couldn't provide that. It feeds into my 'youth rights' bit, even - we treat kids like they're just little blobs of emotion who can be controlled without needing to help them interact with the real world.
I just pointed what I think are currently flaws. There are currently no penalties for bad behavior, and no honest assessment of kids abilities. There is also an incredible lack of optimism about the children capacity (they aren't told that they can improve), and (what I didn't post before) a lack of real-word anchoring of expectations - at a minimum, we should tell children that it's actually ok if they don't excel on everything, but they should work to excel on something (and some things are more important than others).