link to original reddit post by /u/Perleflamme
States and their economies benefit from poor citizens as well as from wealthy ones.
But if wealthy citizens look for productivity and bring much wealth in return, they are hard to keep and maintain: to keep them, states constantly need to please them. It is therefore hard to grow a state on wealthy citizens, as competition with other states constantly is relevant and dangerous to states and the monopoly they run.
On the opposite spectrum, poor citizens are the risk-free assets of states: they are somewhat productive, but very obedient.
Poverty has many advantages, for a state: poor citizens depend on the state to live, which provides easier ways to grab more political power. They don't have much free time and propaganda-free education, so that makes them easy to manipulate with empty promises, diversion, false dichotomies, scapegoating and similar common political tactics.
But that's not all: once a given poverty threshold is reached, citizens can't escape anymore. Whatever they do, they have to depend on the state and can't emigrate without taking even greater risks for their lives. Once these poor citizens don't even have ways to defend themselves, either by taking away their weapons or their will to use any weapon, that's when poor citizens become risk-free assets. Competition is out of the equation and discontent doesn't produce instability anymore.
This citizen capture is a way to create very interesting citizen-assets for any state. Each of these assets isn't very profitable, but growing their number is when a state ends up with much wealth.
As a result of their number and of a somewhat productive planned economy, states end up with credible ways to create public debt. Such state create a public institution that records its public debt. And any profit of this institution is given back to the state.
It creates nearly loan-free public debt that politicians can use to divert this created public fund into the pockets of their friends, at the expense of all their citizens, but mostly at the expense of the poorest ones. Once the fiat debt is created, the state can then print more fiat money, to earn on that inflated fiat debt, at the expense of anyone having to own this fiat money.
Curiously, most people believe inflation hurts the rich and taxes proportionately to what people own. That's a common mistake. In practice, it only taxes people who own fiat. But wealthy people don't own fiat, they mostly own assets and fiat debt. They don't earn as much as the state from the inflation, but they still are on the earning side.
The ones who are hurt the most are the poorest people. As always, within a state, the ones who are hurt the most are the poorest people.
Obviously, this is a horrible practice. Fortunately, there are ways out of it.