You are speaking of an aristocracy/oligarchy, that is not the same as Democracy. Democracies in time become oligarchies and as Machiavelli put it beautifully when he said "The people desire not to be oppressed by the elites (1%) while the elites desire to oppress the people and from these two humors arise the frictions in cities".
But you are right in saying that a dictatorship can work if there is someone benevolent, otherwise its bad for all. I agree that if there is a political/intellectual elite that works towards the national cause then progress can happen, but how are you ever going to have such elites work with one another? This is why Rome had its Social war and its Civil war in the late Republic. It did however work in the Early Republic...
Unless you're talking about a direct democracy, the majority of democratic systems are fundamentally aristocratic and limited to the hands of a few. But these systems didn't 'become' like that, they were designed to be exactly as much -- e.g., the lobbying laws that allow the elite to shape laws to their favour. That wealth is always limited to only a few, though that few may arise from different factors (e.g., lineage/old money or Steve Jobs-types).
Some regress even further into an oligarchic rule (e.g., in Pakistan), but that's when you have bad design + bad people. I mean, they are democratic in as far as just following the technical processes (elections, legislation, etc), but otherwise, they're oligarchs.
However, unless the US, UK, Germany, France, etc, are shook to the core by an event (e.g., a world war, total economic collapse, etc), they will not regress into oligarchies. They will stay as they are and maintain the course, albeit with shifts between liberal and illiberal regimes.
Realistically, the people are usually a non-factor in rule, even in democracies. We elect trustees who will decide on our behalf, but these trustees seldom consult us, much less obey us. They'll tow the party line in most cases, or when given the opportunity, go with their own opinion.
What matters for the people is (1) the ability to remove a despotic or incompetent regime and (2) the ability to hold the ones above them accountable easily and without retribution.
It's here where every Muslim country fails spectacularly, and you'll even see people be OK with this (e.g., on this very forum) not understanding that they're screwing themselves.
However, for (1) and (2) the US, EU, etc do OK.
