It doesnt... but you have the option to. I think you're missing the point. The game has many open mechanics to allow players to play how they want.
If you dont want to manage so many cities, do not build them. Place them strategically. You can disband cities you capture. Or any settlers you receive from doing so. You can choose not to build any cities other than the first one. You will of course be restricted in the number and variety of units you can build and the speed at which you can do so. You can choose to build only three cities, one of each racial type. There are no restrictions in terms of buildings in a city other than race & the special resource nodes that come under the cities territorial borders. IIRC.
In short you can choose what you want to do and for the most part, not be forced into doing anything you dont want to.
The openness of the mechanics is one of the aspects I find appealing. Im sure between the neutral and AI factions, any weak cities will be eaten up and used by them to attack your other cities.
I can do all these things, but they will make me lose the game, due to the AI expanding without limitations.
The entire point of this thread is to have an option to change the rules for both the human player and the AI, not to create some self-imposed rules.