The principle on which human interactions, political or economic, must be based are those of individual rights.

Free-market capitalism is the economic system based on this principle. A government, instituted to protect citizens from force and fraud, must also be based on this principle, and obviously a "pure" democracy, unfettered by restrictions on violating the rights of others (the Bill of Rights is one such restrictor) would not do the job.

I think when most people say "democracy," they are referring in shorthand to a checks-and-balances representative system similar to that in America, or like parliamentary systems in other nations.

Even a monarchy would fit the bill if the monarch was restricted in his actions to prevent violation of individual rights. I just don't see many practical ways of doing that.

In short, free markets and free systems of government are a consequence of principles, not a cause.