I think the reason is simpler - Larry Page is in charge now. His approach is to trust the designers not users. And that approach results in products designers like and users don't. See http://vimeo.com/29965463 for discussion on how things have changed in Google w.r.t design.
There's nothing intrinsically wrong with designer-first UI. After all, none of the points pg pointed out are engineering related.
The problem here is that there is still a confusion between graphics designers and interaction designers. A lot of companies let the former do the job of the latter, and it shows.
What I am saying is that new Google design is not a pathology of a large company, but a result of a single executive decision. Before red primary buttons would have failed testing. Now this testing is simply not done. New way is faster.
An intriguing possibility is that Larry knows they are producing garbage, but thinks it will work out long term, like Android.
You seem to have an intimate knowledge of the inner workings of Google's product design, well beyond that of an average software engineer at Google like myself. I'm curious how you came to be in possession of such insight, since it apparently surpasses my own as a lowly Google employee.
