Okay...I just started playing, and I'm confused by the difficulty. I started my first game with the tutorial's recommendations (sub-par intelligence, 3 factions, beginner difficulty). I couldn't keep up to the other races as far as tech, etc. goes (maybe I wasn't trading enough?), but I absolutely crushed them militarily...they never formed fleets at all until later on, in which I still crushed them. The only battle I ever lost (after obliterating the Altarians and about to obliterate the Torians) was for Toria, the home planet of the Torians, the strongest race in the galaxy...and even then I pretty easily brought in some other ships to take care of them.
Will the difficulties balance themselves out on harder difficulties?