I'm not so sure about it being inevitable, and I don't think it's really that simple at all. Some of the arbitrary limits make it so you benefit from expanding rather than the other way around, e.g., the one-district type limit. It's arbitrary that the limit is one per city, rather than x per empire. You could have a capital with three campuses and a max of three campuses per empire, until something is unlocked (a civic or whatever). It's arbitrary that all cities have a three tile radius limit, rather than it expanding with population. It's all just design choices.
The "arbitrary limits" are just game design. The game can be designed this or that way. They are limits just the same. The only difference is that setting a higher production cost on settlers, for instance, feels like a limit, whereas having it on lower production doesn't. But it's the same thing, a production cost. There's nothing intrinsic or natural about one type of game design, other than people not typically enjoying constrains.
Another example: what's so inevitable about conquering cities with wonders being equivalent to a greater score? Wonders are set to 15 score, so conquerors have an advantage. But that could clearly not be the case by simply giving the score to the builder, not the owner. Even in Civ 6 that's possible to accomplish: just mod in +8 Era Score for building a wonder of the current era, and reduce score from owning wonders to 4 points. So if you build and own it, that's 12 points. If you conquer it, it's 4. If you build and lose it, that's still 8, double those of the conqueror. (obviously that would require rebalancing era score system, I'm just showing how it can be done).
The game is designed in such a way that expansion is always beneficial. But that's not an inevitability. In fact I'm pretty confident that at least in part this derives from Civ's focus on external conflict (conflict with other civs). That's been at the core since the beginning, but it's also one of the things that you often see people request to be improved: more internal conflict, as real societies and empires experienced.
There's very little of this in Civ, and the little we have is pretty barebones and oversimplified. E.g. the Dramatic Ages mode. It just means it's an area that can be improved. Rather than an abstract and tedius Global Happiness, give us mechanics to meaningful interact with the empire.