Jonah Goldberg had a good post on why democracy should not necessarily be our goal in Iraq. As he points out, democracy does not necessarily mean freedom. History is full of examples of democracies gone bad, Germany prior to Hitler's ascension being the most prominent example.
He argues instead for liberalism, in the classic sense of the word, not the modern perverted meaning. How we mean liberalism? As he puts it: "rule of law, individual liberty, free markets, free expression, etc etc." or what we call conservatism nowadays since the unfortunate shift in the meaning of liberalism. Conservatism, as a non-ideological philosophy, does not demand a particular form of government, depending rather on the cultural and political heritage of each nation or people to determine what form of government is best in that time and place.
Democracy would not have worked in 9th Century England, for example, because they didn't have a history of the ideals that democracy would require. In a similar vein, almost any form of government other than democracy would have failed in England in the 19th Century because by then their culture and society presupposed democratic institutions.
So what does this mean for Iraq? There is no significant history of democratic/republican institutions, or even their precursors, in Iraq. If we hadn't imposed decolonization on the British Empire following World War II, perhaps they could have passed the concept of freedom on to the Iraqi people, but unfortunately they didn't have time.
While it may be true that all people have the yearning in their heart to be free and make their own decisions in a democracy, if they haven't developed the good habits necessary to sustain such a vision, the democracy will inevitably decline. People will choose security over freedom, attempt to vote themselves money out of public funding, and attempt to turn the democratic government to their own advantage rather than seeking the common good. It's for that reason, democracies can only flourish in areas that have the necessary precursors that Goldberg details.
For example, rule of law is a must for a stable democracy. Now, by rule of law, we don't mean just that laws are enforced evenly and in an unbiased manner. Perhaps even more importantly, it means that laws are predictable from day to day and aren't subject to sudden changes. If people can't make plans because they don't know what will be illegal tomorrow, then a stable yet growing society is impossible. I think American often don't realize how important this is; it's so ingrained in our society that we can't take it for granted because we don't even notice it.
A free market can be an excellent way to learn democracy. It teaches people self-reliance, so they to not to rely on outside (such as governmental) assistance, while also teaching the importance of community, since all free economic transactions require agreement and cooperation. Government can have a role to play here, especially at the beginning of a free market: making sure the transactions are done fairly, ie full disclosure laws, verifying measurements are done properly, etc.
Unfortunately, we don't really see these traditions existing in Iraq, or other Middle Eastern countries, for that matter. Turkey is working towards it, but even there, we're probably not ready for full-blown democracy since the instincts of the extremists in society are frequently kept in check by the understanding of impending military takeovers of the government. Iran is theoretically a democracy, but there the clerics have so much power, they're really in many ways more of theocracy.
Back when the invasion of Iraq was first undertaken, I stated it would take at least two generations until democracy really took hold there. (I hadn't started blogging yet, so I can't prove that to you, but I promise I said it.) I still believe that. As I said above, these traits take time to instill, but it can be done. India at one time had no real democratic traditions, but they are now the world's largest democracy. There's no reason, with time and patience (that last attribute sorely lacking in America today), the same can't be true in Iraq. But trying to do it too fast could destroy the whole project, and I fear that may be the result.