Let me start of this question by clarifying some things about the population of wizarding Britain. According to the answers to this question, nobody asserts that the population of wizarding britain exceeds more than a few thousand. Yet there seem to be thousands of people who work in the Ministry of Magic based on this excerpt from The Goblet of Fire about the Stadium for the Quidditch World Cup.

Seats a hundred thousand... Ministry task force of five hundred have been working on it all year.

We assume of course the country would have come to a standstill if a significant portion of employees work had to stop work for a year to work on a stadium so the total number of employees for the ministry should at least be several thousand.

So how can an economy work if almost everyone is employed by the government, i.e the amount government employees get paid in tax is less than the amount they earn so the government will forever be running a deficit, and since there doesn't seem to be an international banking cabal in the wizarding world (since the goblins run the banks) won't the government just go bankrupt?

Another point is familys like the Malfoys and the Blacks are super rich, without seeming to do any work at all, based largely on inherited wealth. But the only way that works is if people have always been fiscally conservative for generations, which would have led to a lack of money in the economy and thus bankruptcy (since the concept of inheritance tax doesn't seem real in the wizarding world). One could assume you accumulate wealth by running significant amounts of businesses, but literally every wizarding business seems to be located on Diagon/Knockturn alley or Hogsmeade - and most if not all seem to be independently run Madame Malkins - Robes, Floreans Ice Cream, Pudifoots Teashop, Olivanders wands etc. and not run by some conglomerate owned by one of these rich familys, so how do they make there money?



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