Despotic Dystopias: Lessons From Venezuela and Iran

What do Venezuela and Iran have in common? Both countries are ruled by ruthless dictatorships – the Chavistas in Venezuela and the mullahs in Iran. Both regimes are determined to cling to power despite being considerably weakened by sanctions, foreign military action, and domestic unrest. Venezuela and Iran should be rich – they are blessed with the most abundant oil deposits in the world – yet their people are immiserated.

Why?

21st century socialism

Venezuela is a case study of how to destroy an economy. Once Latin America’s wealthiest country in GDP per capita terms, today Venezuela is one of the poorest in the region.

Hugo Chavez came to power in 1999 under the banner of the so-called Bolivarian Revolution. His programme of "21st-century socialism" included nationalisation of Venezuela’s vast oil reserves of an estimated 300 billion barrels – possibly the largest deposits in the world.

Rents from oil sales funded costly social programmes, including subsidies for healthcare and food, and even handouts of free homes and appliances. Land confiscation and redistribution eroded property rights. Domestic and international investment dried up as the rule of law was abandoned.

Fiscal and monetary indiscipline continued under President Nicolás Maduro following Chavez’s death in 2013. The Maduro government intensified price and currency controls, resulting in shortages of basic goods like food and medicine.

After years of aggressive money printing, Venezuela experienced hyperinflation in the late 2010s. Official data from the Central Bank of Venezuela showed a peak of a 345 000% rise in prices in February 2019. Livelihoods were destroyed and even those with jobs resorted to scavenging through garbage to find something to eat.

Through corruption and mismanagement, combined with lower international oil prices and sanctions, oil production slowed from a peak of 3 million barrels per day (bpd) in 1998 down to half a million bpd in 2020. In late 2025, production improved slightly to 1.1 million bpd owing to relaxations on foreign oil firm, Chevron, which was allowed to operate again.

Despite its abundant natural resources, in a mere quarter of a century, Venezuela’s economy was gutted. No economy can survive the ravages of socialism for very long. That 8 million refugees have fled the country speaks for itself.

Maduro’s arrest by American special forces on 3 January has potentially altered the conditions in Venezuela and the region in a fundamental way. Beleaguered Venezuelans could have a chance to set things right, but the regime remains in place – for now.

Iran on the edge of revolution

The violent protests that have engulfed Iran since the end of last year are driven by a multiplicity of factors, including religious and sectarian tensions, separatist movements, water shortages, and the humiliation of the 12-Day War with Israel.

However, the catalyst for the current unrest was the rapidly escalating financial crisis of late 2025. The currency, the Iranian rial, has plummeted to 1.5 million rials per one United States dollar, its lowest ever rate. This comes as annual inflation hit 42% in December, with food inflation reaching 72%.

It is no accident that the protests against the Islamic Republic started in the bazaars of Tehran, where shopkeepers struggling to make ends meet took their grievances to the streets.

Like in Venezuela, Iran’s government has placed tight restrictions on foreign currency exchange and maintained subsidies on essentials like fuel, food, and energy. As in Venezuela, this has bred rampant corruption as insiders connected to the Islamic Revolutionary Guard Corps (IRGC) control access to these essential goods.

In a desperate bid to appease the protestors, the Iranian government has increased subsidies on basic goods such as rice. However, there are reports of demonstrators in the city of Abdanan breaking into a military-run supermarket and throwing fistfuls of rice in the air.

Perhaps Iranians are beginning to see through the ruse of economic populism?

Common traits

Venezuela and Iran are cautionary tales of statism.

The experience of both countries reveals fundamental truths of economics: price controls, subsidies, and high fiscal deficits undermine economic production and destroy wealth creation.

In both Venezuela and Iran, loss of revenue resulting from oil sanctions has led to widening fiscal deficits, as both governments continued to fund extensive welfare programmes and high military expenditure despite having no money to do so.

To fill the gap, both the Venezuelan and Iranian authorities have pursued expansionist monetary policies, resulting in a debasement of their respective currencies, the bolívar and the rial.

In response to Western sanctions, both countries have sought to align themselves with rival powers, China and Russia. Despite much hype about BRICS and the supposedly changing world order, it is clear after the 12-Day War and the arrest of Maduro that Russia and China are mere fair-weather friends and that the West and Western-aligned states remain at the apex of the geopolitical pecking order.

Sanctions have limited utility. They may create some discomfort for authoritarian governments, but those in power can find ways to circumvent them and the consequences are more acutely felt by the civilian populace. When economic pain starts to hit, authoritarian leaders are quick to blame foreign sanctions for their own governance failures.

The way out

The antidote to the tyranny experienced in Venezuela and Iran is freedom:

• Private ownership over state control. Property rights are essential for economic development, but they are also a bulwark against repression.
• Instead of price controls, let prices float free. Remove subsidies and let the market allocate scarce resources more efficiently than any central planner ever could.
• Hard money over money printing. Venezuelans and Iranians who held Bitcoin, gold, or American dollars, would have been able to preserve their capital. Those who held only local currency lost everything.

I am in awe of those who have bravely fought for freedom in Venezuela and Iran. They have endured incredible hardship – and they have a long way to go still – but their cause is a just and noble one.

Ansara is CEO of the Free Market Foundation.