What we have in this essay is an extended gloss not so much on representative government (despite the title) but on why it is better to be active than passive. In part the argument is on certain practical advantages to people in being active, namely, that they can protect their interests better when they are active and the society as a whole does better collectively when people's energies are engaged. So far, so good: this is the classical liberal argument for liberty, one already put forward by Adam Smith in his Wealth of Nations (1776). Only the individuals know their own interest, in the end, and furthermore, the energies released by giving them liberty to pursue their own interests makes things better for the society overall.
But Mill is making more than a self-interest argument. His primary interest seems to focus on a virtue argument — saying that the active person is more developed — intellectually, practically, and morally — than the passive person. The premise here goes back to Aristotle, who held that the goal of humans was the full development of their capabilities. Note that Marx (at least one stream of Marx's thought) was making a similar argument that human beings constitute themselves in labor.
If I may be allowed to put the argument crudely, active people are good (in the sense of admirable) people, and passive people are bad people (in the sense of being "a poor excuse of a human being"). It isn't so much that passive people are immoral, exactly; it's more of a sense that Mill is looking down his nose at them. Maybe Mills is simply making the impersonal observation that people are happier when they are active, but I am also picking up an impression that he is blaming and condemning them for their inactivity.
Note that this essay was written in 1861, in the midst of great social and political ferment within Britain, when the question of "who should be allowed to vote" was very much on people's minds. The Reform Bill of 1832 had given the franchise (the technical term for the right to vote) to all property-holders (i.e., including the wealthier middle class) but not to workers. (Even with this reform, only 7% of the population could vote.) Socialist movements (including Marxism — much less known then than now) were actively organizing workers into unions and were calling for revolution. This political pressure resulted in the passage in 1867 of another Reform Bill that extended the franchise to urban workers. (Better reform than revolution.) In 1884 & 1885, further legislation extended the franchise to agricultural workers. Only at this point do workers constitute a majority of the electorate.
[Specific chronology:]
Note that there are two arguments here: the self-interest (and self-interest through social interest) argument and the virtue argument.
Give the reasons behind the two self-interest arguments, and note their similarity to Adam Smith.
Note the role that liberty plays in both of those self-interest arguments.
Now note the "virtue" argument. In what ways, or for what reasons, is it better to be an active person than a passive person, in Mills's view? What are the bad things he sees about being a passive person?
It follows that democracy is good because it allows people to participate, even if only through their representatives.
Note that Marx was making a very similar point at about the same time: that humans "constitute themselves" (i.e., come to understand themselves and their role in the world) through their labor. So Marx advocates changing one's working conditions to live a better life. And since under capitalism the nature of work is driven by profit and controlled by the owners, Marx concludes, this dominance must be changed and the workers made free to have a hand in the conditions of their labor.
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