GRRR MRR! Two games in a row now lost due to bad luck with random events.

First in MoO2 the Alkari surrenders to the Psilon just as I am about to attack the Alkari home planet making the Psilons way too strong and only empire I can reach with my ships. To be able to take out a Psilon planet, I need a much stronger fleet but I am incapable of supporting more ships (50% tax and just about out of money and already built star bases at all my planets). I might try to think of a way out later but now it feels hopeless.

Changing to MoO 1 for a change of pace I get cornered hard (remember the AIs cheat a lot and are capable of colonising much faster in the very beginning) and have problems getting tech needed to do a successful invasion of a neighbour when I get my planets decimated by a couple of lovely random events followed by a Galaxy Council vote where someone else gets voted ruler. Not having enough technology nor production to defend against the incoming death fleets in the final war, I surrender.

It is rare to lose against the computer in MoO2 for me unless I specifically build a weak race so maybe I can turn it around somehow if I think for a bit. It is also rare for me to go for democracy but it should not be that weak a pick, or is it. It certainly is the last choice for government pick.

The randomness is one of the great strengths of MoO, IMO.
Every game is unique, while playing for example Civ 1-2 (haven't tried the rest yet), every game tends to follow the same predictable formula.
Also, I like it when it's actually possoble for an experienced player to lose to the AI, even though it cheats. It's virtually impossible to lose in the Age of Wonder games, for example.

Yeah, I like Master of Orion a lot but sometimes when hit by a double whammy when in a precarious position, it feels a bit MRR(shan). I tired long ago of Civ 2 and 3. The lovely fan patches for MoO2 brought the game back onto my hard disk even if I play the original more. Picking democracy was an effort to combat the problem of sameness in my MoO2 games.

One possible advantage vs Psilons is that they are relatively benign. SO if you are not at war yet, you can probably safely build up and attack them later. It is relatively easy to sign treaties with the Psilons and keep your relations very friendly. Once you have trade, tech and NAP treaties, start building outposts, if not outright colonies, in Psilon systems to increase your exploration range. The worst thing that can happen is getting framed and the Psilons declaring war (which will eventually happen if the Darlocks are in play). But if your own fleet is big enough, generally they will just give you a warning. Of course, playing catch-up in tech vs Psilons will be difficult. Sometimes the Psilons will willingly give you technology they consider obsolete if you simply demand it. But it is very risky, and a DoW is inevitable if you try it too often.

One advantage for not having contact with many alien races is that the "you got framed" random events are not generated by the ones you haven't met yet. Since getting framed is probably the biggest danger in your current position, you may actually be fairly safe for a while.

Thus, go for an Orion-kill would be my first answer. Try and find Orion and take out the Guardian. Then use the captured tech to wage war on whoever looks weakest.

The second answer would be to tech-up so as to be able to capture Antarean raiders. Capturing Damper Field + Xentronium Armor is generally enough to win the game, either through conquest or by Antares-Kill (when combo-ed with ships outfitted with EMG merculites), although Molectronic Computer, and Particle Beam are also nice to have. Especially if conquest is not your end-game, you now have some nice techs to trade to get those key techs only the Psilons have researched. Thus if you go for an Antares-Kill, you can use the Psilon Empire as a buffer between yourself and other more belligerent aliens while you concentrate specifically on building a fleet to capture Antares.

If none of those seems viable, then Neutron Blasters + Tractor Beam is probably the way to go. Start capturing enemy ships and stealing their tech, hoping you can keep up with the Psilon research juggernaut doing so.

I did get out of my corner using outposts. The other races were not that far away.