For example: I had known at that point people who had been L4 for years. I think 8 years was the longest I encountered. So you're right there wasn't a strict "up or out" culture but that was always the case.
The problem was if you were a long-term L4 one management change could suddenly put you in the hot seat. A new director may decide they like "up or out" so even though you had 8 years of EE+ ratings, you suddenly were vulnerable if you didn't get promoted.
Back when I worked at Google L4 and L5 promos were done by committee. These are now done in-org by leadership. This is both better and worse. It also makes long-term L4s less likely to happen. Interestingly these promotions still have target percentages. The first time it was tried they had to un-promote some people because too many got promoted.
FWIW, I was there 10 years, stayed L4 the whole time because I never wanted to go for promo because the whole process stunk. Left end of last year of my own accord (never liked the place). The only place where being "still" L4 caused me grief was from a higher up inside Access (Fiber), where they got pretend to play at being their own company for a while (with their own policies etc) after Ruth's Alphabetization -- and then they got the axe.
In any case, agree about your other points. It's labour discipline coming to Google. Though I think it's less about cost and more about discipline/subservience.
This is out of date. "Up or out" from L4 was dropped around 2015 or 2016 or so. It was considered "fine" to stay at L4.