This chapter presents the stage for the analysis by discussing the need for economic adjustment and some of the political determinants of government policies. It examines the evidence about whether and how type of regime influenced economic policy choice and looks at the influence of regime type on economic outcomes. The chapter discusses the debt/democracy issues around, and explores the way debt-related economic problems have affected the consolidation of democratic systems. Debate over the origins of the economic crisis of the 1980s has generally turned on the relative weight of international and domestic factors. Economic policies reflect the interests and ideological orientations of a government’s support coalition. The chapter aims to divide political regimes into three types: authoritarian regimes, established democracies, and transitional democracies. Established democracies are systems in which executive authority has long been limited by institutionalized processes of electoral competition and bargaining among independent and relatively evenly-balanced political parties.