The breakdown of the Mughal Empire led to the rise of successive states including Awadh, Hyderabad, and Murshidabad which emerged as new political entities. Initially these successive states flourished and prospered due to the exploitation of the resources of their territories. However, rulers of these states used these resources not for the welfare of the common people but on their luxurious life style. This created a great divide between the elite class and the common people. Most of the wealth was extracted in the shape of revenue from peasants who suffered naked exploitation at the hands of their rulers. The royal dynasty of Awadh was one such example.

The early rulers of Awadh were known as 'Nawab Wazir' and recognised the Mughal Emperors their sovereign. Ghaziuddun Hyder was the first who assumed the title of 'Badshah' and gained independence from the Mughals.
The state came under the control of the British after the battle of Buxer in 1763 when the combined forces of Shah Alam, Mir Qasin of Bengal, and Shu'jauddola were defeated. After this, a British Resident supervised the affairs of the state reducing the authority of the Nawab.

Feeling secure internally and externally, the rulers devoted all their time to luxury and entertainment; Awadh was a fertile territory and had sufficient financial resources. The major part of the income was spent on the royal family and on those who were attached to it as courtiers and servants. As the number of the royal family increased, more income was devoted to their expenses.

The ruler kept a large number of women in the harem. Shuja'uddola had nearly two thousand women from whom he had 25 sons and 22 daughters. Asafuddola had five hundred women and produced 30 boys and 23 girls. Sa'adat Ali Khan had 19 boys and five girls. Wajid Ali Shah, the last ruler, had 40 boys and 34 girls. One can imagine how the growing size of the royal family became a heavy burden on the economy as all of them got hefty amounts of money as allowance from the state. Getting money without doing anything made the royal family and its members lazy, worthless and corrupt; most of them spent their time in the company of women or eunuchs and in the pursuit of useless hobbies and games.

As a result the values of society also changed. The poor, seeking to make some money willingly offered their daughters and sisters as mistresses to the rulers and the members of the royal family. It was estimated that three per cent of the income of the state was spent on women.

The other expenses were marriage ceremonies of the members of the royal family. Forty nine lakhs were spent on Shuja'uddola's wedding ceremonies. Asafuddola's marriage cost the exchequer 34 lakhs and Wazir Ali's marriage 30 lakhs. Asafuddola spent 40 lakhs on the festivities of Holi and Basant. When Ghaziuddin Hyder assumed the royal title, he spent 200,000 on his coronation. Nasiruddin Hyder celebrated several festivals and solemnised many marriages all of which cost the treasury the entire wealth accumulated by his predecessors. It was estimated that his monthly expenditure was 1,000, 000 rupees.

As a result of these expenses the income of the state could not meet the growing demands of the ruling classes; consequently, the officials imposed new taxes on the common man. The economic chasm between the rich and the poor thus became wider and discrimination weakened the society of Awadh, so when the British decided to seize the state there was nobody to defend it. Wajid Ali Shah meekly surrendered to the British and accepted exile.

The causes for the downfall of the Awadh state were the creation of a parasite class which did not contribute anything to the economy but consumed its resources Secondly, there were many candidates for succession and they were ready to give great concessions to the British in exchange for their support. After Shuja'uddola, on the occasion of every succession, the East India Company got concession after concession. On the succession of Sa'adat Ali Khan, it got half of the state of Awadh under its control. The British Resident became the virtual ruler.

Realising the worthlessness of its rulers, it was decided to incorporate it into the British territory.

History tells us that when a ruling family becomes a financial burden on the society, it causes lack of development and creates unrest among the people. Also, whenever political candidates attempt to succeed with the help of external powers, they give major concessions to it in exchange, at the cost of the country's interest. If any government spends more than its income it meets the expenses by taking loans instead of reducing its unproductive expenses, consequently this results in the imposition of more taxes on the people which leads to a financial crisis and the breakdown of the social fabric of the society.