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Due to the nature of Erfworld, the larger a side grows, the harder it becomes to maintain.
This is because the amount of Shmuckers a city generates for its side is not a fixed amount. After a side gets above a certain number of city levels, the Shmuckers produced by ALL of them starts to go down.
As of 54 turns after tBfGK, Gobwin Knob is starting to run into this mechanic.  Haffaton was badly hamstrung by this, eking out an enormous side through a combination of a tiny (in the hundreds) army, fielding low Upkeep Uncroaked, and Flower Power.
If a Warlord or Courtier manages a city, costs are lowered for things like city improvement and production of extra equipment and provisions, the amount of Shmuckers the city produces is increased, and the upkeep for units which spend the entire turn in the city is reduced. Further, high level cities produce a lot more Shmuckers than low level ones, but at the cost of needing Shmuckers for the level up/upgrade to take place. Dirtamancy can reduce these costs. 
This does not limit the number of cities a side has, just the levels. A side with four level 4 cities would suffer as much as a side with sixteen level 1 cities.
The most efficient way to maintain a side is to have small number of high level cities. This maximizes Shmucker production vs. total number of city levels across the side. The downside is losing any of these cities would hit much harder than the equivalent loss in low leveled cities.
It is likely that colonies are used as a way around this mechanic, essentially splitting one big side into multiple sub sides, with each of its child sides being completely subservient to their parent.