This chapter addresses some major issues concerning the relationship between the third sector and the state in democratic theory. In the next chapter I consider the relationship between the third sector and the state in welfare theory and in a following chapter the hurdles to the third sector for the democratization of the welfare state in Sweden. Numerous political indicators suggest that we may be witnessing the gradual ‘withering away of the state’ in many western democracies, or at least several vital institutions of representative democracy. Other evidence indicates that the citizens are finding or perhaps even founding new channels of participation and influence alongside the more established ones. However, these new channels are not yet institutionalized and formalized, nor are they recognized as legitimate by democratic theory or by many scholars in political science. Do these mixed signals concerning citizens’ participation indicate a growing crisis for representative democracy and perhaps also for the welfare state, or a rejuvenation of both, based on greater direct citizen participation in new forms of democracy and in the provision of welfare services?