Private ownership of enterprises and property had essentially remained illegal throughout the Soviet era, with Soviet communism emphasizing national control over all means of production but human labor. Under the Soviet Union, the number of state enterprises was estimated at 45,000.
In the later years of the Soviet Union, Mikhail Gorbachev relaxed restrictions on private property and introduced initial market reforms. Privatization shifted Russia from the Soviet planned economy towards a market economy, and resulted in a dramatic rise in the level of economic inequality and a collapse in GDP and industrial output.
Privatization facilitated the transfer of significant wealth to a relatively small group of business oligarchs and New Russians, particularly natural gas and oil executives. This economic transition has been described as katastroika and as "the most cataclysmic peacetime economic collapse of an industrial country in history".
A few "strategic" assets, including much of the Russian defense industry, were not privatized during the 1990s. The mass privatization of this era remains a highly contentious issue in Russian society, with many Russians calling for revision or reversal of the reforms.
In the late 1980s, as part of the perestroika reformation movement, legislation championed by Mikhail Gorbachev—who pledged to build a "mixed socialist economy"—effectively transferred some controlling rights over enterprises from the government to the employees and management. In 1987, over the opposition of some of his allies, Gorbachev succeeded in passing a "law on state enterprise" through the Supreme Soviet of the Soviet Union, which granted work collectives a greater role in running enterprises. In 1988, the Law on Cooperatives legitimized "socialist cooperatives," which functionally operated as private companies and were permitted to directly deal with foreign companies, and reduced reliance on central planning. Later that year, private Soviet farmers were permitted to rent land from the state, purchase equipment, and hire workers, a significant step away from mandated collective farming following decades of dominance by state-owned agricultural concerns. The new regulations were seen as an effort to break state farms into smaller units and address critical food shortages in the Soviet Union.