After the Salem witch trials, the relationship between the wizarding and Muggle worlds underwent enormous changes, and the International Statute of Secrecy was enacted.
Because of the International Statute of Secrecy, the wizarding world "separated" itself from the Muggle world. Yet the wizarding population was too small for it to develop an economy as complex as the Muggle world's, establish a tax system, or become "independent." The wizarding world still needed to exist in dependence on the Muggle world. Many wizards hid within Muggle banks, providing exchange services for them.
It was a very complicated game, difficult for young wizards whose heads were full of Quidditch and Chocolate Frogs to understand. Even some adult wizards were like that. Weren't many Muggles and Muggle-born parents rather unenlightened?
An individual within a crowd was different from an isolated individual. A person in a crowd lost their independent sense of self. Isaac Newton saw so many people buying South Sea stock that he followed suit. The feelings and thoughts of that outstanding physicist and alchemist were useless against that tide. It was the herbivorous part of humanity awakening. An American bison's eyes were set on the sides of its head; it only watched how its companions moved. Even if there was a cliff ahead, it charged on just the same. Even if some bison saw the danger and wanted to turn, they had no way to do so while caught within the herd, and could only be swept forward. Economics called this the Herd Effect, a metaphor for conformity. Conformity easily led to blind obedience, and blind obedience often led people into traps.
Individual impulses were already difficult to resist; collective impulses were even more powerful. Only after that feeling of impulse passed and people regained their calm did they begin to think.