Capitalism is by itself not incompatible with most governments, but it has proven more compatible with open societies than with state run economies. Capitalism is also not quite the same as the harnessing of the market economy with a social twist ie: socialism. The only real problem with socialism is the problem Europe is facing right now. Weak economies and a financial disaster waiting to happen due to generational accounting.
To answer the question, Terrorism is the great threat not to Democracy but to the free and open 'developed' states of the world. It's not one enemy like the soviets, and it is quite capable of fragmenting public opinion and paralyzing the governments from acting.
Phoenix said:
I won't take that one at face value. While the US does a lot of things right, I'd be interested in you showing how its doing 'advancement based on individual ability' better than Japan, Germany, France, Britain, Russia, Canada, India, etc.
In Japan your highschool test scores and college test scores decide how high you go in life. There's some slack of course, as someone from a medium ranking university could still do quite some well, but by an large, where you studied matter more than your actual on the job performance. There's a very distinct class in Japan called 'Elites' エリト and these are highly educated graduates from the top schools. It is still the most hierarchical country in all of G8. It actually matters if you're a bastard child or a pure Japanese, and they make you tell them when you register to live in district.
In France, your pedigree and social standing matter more than your ability. Most people in French management have very high standing in society based on their family name.
Canada is just like the US, if a Canadian tells you it's not, he's lying and being nationalistic.
Britiain still has shades of its old class system at play.
India = caste system.
As for human nature, I think more problems arise from vesting the power to redistribute wealth in a small elite than from having a capitalist society. Inevitably, some people will be more equal than others.
All western democracies are welfare states of some form. The US is the one furtherest from that, but even it has a strong centralized government collecting taxes and redistributing wealth.
Edit: If I can be an ass for a moment, most of the responses so far are from being trying to be a smartass and it's too bad because it tends to bring out the worse in people. This could have been really be an interesting topic without the left wing self-hate.