Start of private enterprise and the market economy in the late 1980s

​After Mikhail Gorbachev came to power in 1985, various economic innovations were started in the Soviet Union. The most important among them was establishing joint companies with foreign partners – the relevant regulations were passed by the Soviet government in January 1987, and by the Estonian Council of Ministers in February. The first venture in the Soviet Union with a Western country was the chemical manufacturer and supplier EKE-Sadolin SP in 1987, established by the Estonian Collective Farm Construction Company (EKE) and the Finnish branch of Sadolin & Holmblad. Other joint ventures included the Soviet-Finnish Finest Hotel Group SP in 1988, and the Soviet-Swiss production and trade company Estkompexim. The ice-cream produced by the latter, called Pinguin, quickly achieved huge popularity in Estonia and became a symbol of the perestroika era.

In early 1987, Moscow established a special regulation concerning cooperatives or small enterprises. This, to a certain extent, allowed private enterprise, i.e. it formed cooperatives of up to three people, for processing production waste and selling the products. Encouraged by this regulation, small-scale production and the offering of services boomed in Estonia. The focus was on innovative products not easily available in the state sector, for example various sweets. The first private cafes opened, offering products baked on the spot. Some enterprising people took up metal or woodwork.

By spring 1989, Estonia already had about 1000 cooperatives. However, this was not yet a market economy and the mechanisms of the command economy continued to function.

The development of market activity and private enterprise was boosted by the general shortage of goods in the late 1980s and early 1990s in the state retail business, and by the introduction of a ration system. A considerable obstacle was the sudden impoverishment of the population. People’s insolvency was increased by hyperinflation, resulting in the rapid fall of the rouble. Foreign currency became the most reliable means of payment (mostly US dollars and Finnish marks), although there was not much foreign currency around.

The real transition to a market economy in Estonia occurred only after it had regained independence, completed ownership reform and adopted the kroon in the first half of the 1990s.

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