Some prominent economists have argued that the structure of a nation's economic life – capitalist or socialist - helps to shape its political institutions. Though its importance seems self-evident, scholars have not yet integrated this idea into the literature of empirical democratic theory. Drawing on previous work, we formulate four propositions about the relationship between economic structure and political democracy. Economic structure does in fact mould political forms, but not in a simple, linear fashion. Rather, it does so in a more complex, non-linear manner, a relationship we label the 'mixed-economy' model. This relationship survives and flourishes in the face of extensive challenges. Its implication is simple: democratic political practice reaches a maximum under moderate amounts of public direction of economic affairs, but suffers at the extremes of both unfettered capitalism and socialism.