In the 1920's the Bolsheviks were struggling with the concept of economic planning. This material examines the details of the planning issues they faced and shows that the major problem is that fundamentally they did not have a criterion for establishing whether a proposed investment project was worthwhile or not. From this flaw followed their inability to choose among a variety of investment projects that collectively required more resources than they had available. Consequently the decisions of which projects to undertake and which not to was made on an irrational basis.

Some of the major investment projects under consideration at the time were:

• Dnieprostroi:

  The construction of a dam on the Dnieper River for the generation of electrical power, the improvement of navigation upon the river and the improvement of land in its vicinity. The hydroelectric installation, called Dnieproges, was to have a generating capacity of 230 megawatts. It would provide power for existing factories and new ones which would be built in the area. The annual power production was projected to be 1.2 to 1.3 billion kilowatt-hours of electricity.

  The cost of construction, as of the summer of 1926, was thought to be in the range of 120 to 200 million rubles. The low estimate of 120 million rubles was twice as large as the cost of building a coal-fueled generating plant of the same capacity. Moreover, if the electrical power was to be utilized there would have to be future investments for factories in the area. The nature and extent of the investment costs for those factories were not known with any degree of precision. The estimates ranged from 200 million to 1500 million rubles.

• The Turksib (Turkestan-Siberian) Railroad:

  This railroad was to Link Kazakhstan, Central Asia (Turkestan) and Western Siberia. It was intended to enable the development of areas of Kazakhstan and Siberia. In particular it was intended to promote cotton growing in Central Asia which would supply the Soviet textile industry and reduce its dependence on imported cotton. The railroad would supply the cotton-growing areas of Central Asia with grain, timber and cattle.

  Some parts of this rail line had been constructed before World War I. A northern line of 650 kilometers connected Novosibirsk, which was on the Trans-Siberian rail line, to Semipalatinsk in the south. In 1912 a private company, Semirechie, had been granted permission by the Czarist Russian government to build a line in the south from Tashkent to Alma-Ata. Only the southern part of the line had been completed as far as Fruenze. There remained 1500 kilometers of line connecting Fruenze over the mountains to Alma-Ata and then on to Semipalatinsk. The estimated cost for the completion of the Turksib was 120 million rubles.

• The Volga-Don Canal:

  This canal would provide transportation between the Volga River region of south Russia and the Don River region of the Ukraine. It would also provide irrigation water for grain production in its vicinity. The estimated cost was 140 million rubles.

• The Svir'-Neva Project: This project involved the construction of hydroelectric power stations to provide Leningrad with additional electrical power. It also involve creating a deep water link from the Gulf of Finland to Lake Ladoga and improvement of the Mariinsky Canal system. The estimated cost was 65 million rubles.