In social science, a passionate debate continues about the expected effect of democracy on development. Many authors believe that democracy dampens development. This paper discredits this view by clarifying the debate’s critical conceptions - democracy, capitalism and development. In the non-communist state, private individuals inspire economic development, because they own the major portion of the nation's resources. Since individuals are selfish by nature, they ordinarily improve their economic welfare if they enjoy ‘fair freedoms’ meaning that the social environment of fair freedom is the key to economic development in the non-communist state. Capitalism guarantees this environment, which suggests that the desirable functioning of capitalism is the clue to economic development. Democracy is the only system of governance that can guarantee long term peaceful functioning of the capitalist economy. Thus, a nation cannot remain poor if she is governed according to the principles of democracy.