"What do the rebels want?"
"Oh, the usual. More money, more freedom, more air."
- Total Recall, 1990
There's nothing democratic about nature, and space takes that argument to its ultimate conclusion. Every form of government humanity's ever lived under is an artifice, of course, but democracy takes that to the next level. As "unnatural" as it might be for humans to form civilizations of tens or hundreds of millions of people, the maintenance of democratic principles that often run counter to deep-seated human nature - the lust for power, vengeance, security, and supremacy for you and the lust for denying them to your competitors - layer another layer of artificiality on top of that.
Barring some kind of transhuman or posthuman renaissance - which I doubt would make things any better, only make a lot of things a different kind of bad - this is not going to change. I run counter to the Roddenberrian ideal that the advancement of technology will change human nature. Human nature is what fundamentally makes us human, and changing one would by necessity change the other. As long as the people going out into space are human, they'll carry these imperatives with them.
The cold truth about space is that there aren't many places to live, the vision of it as some kind of free and libertarian frontier nonwithstanding. Space is the harshest environment that can be plausibly reached. At least in our solar system there are no second Earths waiting for us, nowhere we could alight from our colony ships and breathe the clean, free air of a new world.
It'd probably be full of alien viruses against which you would have no natural immune defense, anyway. Pity the first scouts who go in without environmentally sealed encounter suits.
As far as the solar system is concerned, the settlement of space will take place in artificial environments, be they colonies drilled into the lunar regolith, domes on Mars, or space stations surrounded by the great, enveloping dark. There have been a few space colony design proposals over the last few decades, most notably the Stanford torus, the O'Neill cylinder, and the Bernal sphere. The advantages offered by artificial colonies over planetary bases aren't anything to sniff at, either.
First, and most important, is gravity. Earth has the highest gravity of any rocky planet in the solar system, and while Venus has only a bit less pull at .904 g, the sulfiric acid clouds and daytime temperatures to melt lead will put a significant damper on colonization for the near future. Martian gravity is only 30% of Earth's, and Luna's is half again as low. An artificial habitat can avoid the problems of low-gravity living by using centrifugal force to create a sort of artificial gravity - not exactly the same as what we've got here on Earth, but pretty good nonetheless.
Second, an artificial habitat would have total control over its environment. There would be no snowed-out school days, no blistering 45 degree humidex summers, no monsoons, no tornadoes, and no hurricanes. Artificial habitats built as orbital farms would experience year-long growing seasons with a climate fine-tuned to all the needs of a farmer. A starving world could be fed by those plowing fields where the sun never sets. Heinlein used that theme as one of the foundations of lunar settlement in The Moon is a Harsh Mistress.
Still, the total control necessary to maintain an artificial space habitat brings with it some disturbing implications, particularly in view of how humanity has abused total control when it has been available in the past. Considering the vast number of challenges and the tendency of humans to take the easiest path, maintaining a free, democratic society in an artificial habitat would make the task of Sisyphus seem like a relaxing peck of exercise.
Unlike societies on Earth, artificial habitats in inclement biospheres are wholly dependent on technology to survive, and any serious deterioration in the population's ability to maintain that technology would result in the death of them all. Space is the harshest of mistresses and it doesn't tolerate even the most minor slipups. Governments in artificial habitats would, by necessity, have to control a great number of systems to ensure that the habitat remained viable, and they would do so most importantly by controlling life support - doling out air.
I've seen a proposed Stanford torus design that portrays the interior of the station as being like a long, narrow valley ringed with greenery, buildings and homes, but in reality I don't believe a successful torus design would be nearly that open. Without an external atmosphere, space habitats are gravely threatened by meteoroids which would be burned up high in Earth's atmosphere. Compartmentalization is as necessary in a space colony as it is on a ship, or one breach would doom it all.
Compartmentalization provides the dubious opportunity, for anyone desperate enough to take advantage of it, to deactivate life support functions in a specific part of the station in response to defiance, protest, or open rebellion. Oppressive dictatorships are nothing new on Earth, in an environment where humans can survive without any technical assistance. In light of the crackdown on protestors by the ruling junta in Myanmar, I find it very conceivable that a threatened government would use and abuse their control over the artificial environment to advance its policies and goals.
Freedom of mobility is a key component of a healthy democratic state. Until September 11th, and until this June, crossing the Canada-U.S. border as a Canadian citizen was a perfunctory matter of flashing a driver's license and answering a few questions from the guard. In the Soviet Union, on the other hand, ordinary Soviet citizens required special passports to travel from one city in the USSR to another, let alone leave the country. The strength of a dictatorial state is inversely proportional to the mobility of its population and the capability of its population to place their state in context with the rest of the world.
In a space habitat, controlling the population is almost criminally easy, since there's no place to go. Spaceships and reaction mass would be as affordable to the typical citizen of the future as a nuclear-powered aircraft carrier would be for a modern-day white-collar worker. You might manage to get a space suit and slip out of an airlock, but -- there's nowhere to GO. Even in a densely-settled region of space, habitats would be tens of thousands of kilometers apart at the least, and as far as space goes that's functionally equivalent to a row of townhouses with no space between them at all.
Communication, too, would be simple for a tyrannical government to restrict. The crews of visiting spaceships, doubtlessly restricted to those bringing vital suppliees, would themselves be restricted in areas where they would encounter no one save the elite of the habitat or those specifically trained to deal with them. The components to build radios could be hoarded by governments as "vital tools for survival." With a modicum of effort, it would be very easy to create a captive society with no way of hearing about the outside world and no way to see it themselves, short of a telescope.
The heirs of Kim Jong Il may yet build their twisted utopias of command and control out in the darkness of space.