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How does Stalin's dual circuit monetary system break this equation, or overcome it?

Let’s go over how the price anchor in MMT works first. The key here is that the currency issuer (i.e. the state) also determines the wage (labor-hour), thereby anchoring labor to the price of commodity.

Job Guarantee is one implementation of this principle that is tailored to the present day modern economy, given the dynamics of private-public enterprises, legal and monetary institutions and the various infrastructures already in place.

In short, the Job Guarantee ensures that anyone who is willing to work will be employed in a “Public/State Enterprise”, and by setting the price of the labor-hour (how much the State is paying a publicly employed worker), it also sets a wage floor and thereby anchoring the rate of labor and commodity to this, since price is relative.

Let’s say you’re a nurse working in a private hospital and you’re being paid $50 per hour. You want to demand a wage increase, and wants to do so through collective bargaining. Without Job Guarantee, the private employer can simply tell you no, or proceed to lay off workers demanding higher wages, since the labor can be easily replaced.

However, with a Job Guarantee - say the State guarantees a pay of $45 per hour - you can simply threaten to collectively leave the job and join the State-run hospital that guarantees a minimum wage. This minimum wage may be slightly lower than the pay from private enterprise, but the most important part is that two things happen here:

1. The loss in output from the private enterprise layoff is now immediately replaced by the same workers being employed in the State enterprise, producing the same output and receiving more or less the same wages. This keeps both productivity and consumption demand intact.
2. The private enterprise cannot keep a buffer of unemployment to keep its wages low, because the workers it laid off are automatically being funneled to the Job Guarantee program. It therefore has to pay at or higher wage (inclusive of bonus, paid leave and benefits) than what the State offers, otherwise people will simply leave their jobs and join the State enterprise.

Therefore, with the State offering a Job Guarantee and setting the wage floor, this mechanism becomes an automatic stabilizer that controls inflation, since prices are relative to the wage (while output remains constant)!

The Job Guarantee therefore acts as an elastic pool of workers employed by the State - when private enterprises lay off workers, the workers don’t lose their income but instead are taken on by the State, ensuring that both output and demand do not fall off a cliff. Similarly, when the business is booming and the private enterprises pay higher wages, these workers will shift towards private employment and the pool of Job Guarantee workers shrinks.

Now, let’s move on to how the USSR under Stalin’s Five-Year Plans handled the inflation issue. With the 1930-31 Credit Reform, a dual circuit component was introduced to the Soviet monetary system: non-cash and cash rubles. Non-cash ruble circuit allows the settlements between enterprises and long-term financing of capital investment (for the creation of means of production), whereas the cash ruble circuit allows the settlements of the transactions between the citizens and retail trade turnover (this is where ordinary citizens get paid for their labor).

The two circuits are only partially overlapped - where the cash ruble emission is issued and regulated by the State Bank on the basis of the availability of goods and commodities, in the form of wage payment to the workers.

What this means is that it allows the State to run a perpetually large deficit to finance development, without having to worry about inflation since the amount of cash ruble is tightly regulated, and determined by the State.

The loop goes like this: the State runs a large deficit by creating non-cash rubles to finance capital investments -> new production/factories are built -> new goods are created/issued -> cash rubles are then issued on the basis of productivity and availability of goods in the form of wage payment.

As such, demand-side inflation is effectively controlled even though huge sums of non-cash rubles have been emitted by the State Bank to drive large scale development.

So, very different implementation from MMT’s Job Guarantee, but both share the same principles: in both cases, the State sets the wages!

This is very different from price fixing, as an example, since fixing commodities to particular prices does not account for prices becoming lower as production of private enterprises become more efficient than the state enterprises.

I think many Marxists (including Roberts) who don’t like MMT are still stuck to the “fixed exchange rate regime” mindset (e.g. gold standard during Marx’s time and the Bretton Woods afterwards) and do not understand that in a free floating exchange rate system, many of the restrictions no longer apply. Stalin correctly decoupled the ruble from gold in the late 1920s/early 1930s, and the USSR economy took off.