By James Xu '18Last week, North Korea held a parade in the street of Pyongyang to celebrate the 70^th anniversary of the Workers Party, the communist regime that has been in control of the northern half of Peninsula since 1945. The army and other military members marched in front of Kim Jong-Un and his high-ranking officials. The parade was also accompanied by missile launchers, tanks, and jets. Children danced on the street in front of the prideful North Korean citizens. The entire parade was estimated to cost around two billion dollars, which is 1/15^th of North Korea’s GDP. In an impoverished country, one may ask: where does the government find the money to finance such parade?When we think of North Korea, we think of a country that is plagued by famine. We think of a country whose leadership seals of all connections to the outside world, brutally suppresses any differences with the ideology of the state, and commits all of its resources to either nuclear weapons or luxuries for the enjoyment of its leaders. But when asked about the specifics of its economy, most people just assume that it follows a strict communist system in which everything is centrally planned. This impression was largely true until the famines in the 1990s, during which the government realized that the best way to increase agricultural production was to split production with the farmers. This seemingly small change essentially permitted the ownership of private property, the foundation for capitalism.Over the next 20 years, perhaps inspired by the Chinese system where a capitalist economy flourished under the control of a communist party, North Korea has condoned the so called “grassroots capitalism” movement and has allowed it to develop under its strict communist laws. Restaurants, finishing business, gold mine, coal mine, and other enterprise was created and developed spontaneously by individual entrepreneurs. Of course, those businesses are still termed “state owned enterprises”, but many of the private managers now retain almost full control over companies’ operations. They face little oversight when buying raw materials and selling its finished products, and, more impressively, they get to keep the lion’s share of the profits.As a result, a small but growing bourgeois class is quietly emerging. Some of the more affluent businessmen are now sipping lattes in the café of Pyongyang, enjoying South Korean pop music and TV shows (illegally), and driving cars (mostly Chinese brands but some BMWs) on the road. Of the country’s 25 million residents, approximately 3 million now own cellphones, confirming that a small but definitely existent middle class has been established by the grassroots capitalism movement.So far, North Korea has denied the existence of such phenomenon, but is turning a blind eye to it. The reason is not due to execution difficulties: with the level of surveillance North Korea places on its citizens, the government can easily crush these movements. Instead, the party is observing how this quasi-legal trend plays out. How much profit can it bring to the government and how much foreign influence will enter? Most importantly, will it pose any threat to the party’s power? China has proved that, with careful execution, a capitalist economy directed by a communist party can not only succeed but also prosper and bring immense wealth to both the government and its subjects. It is definitely a prospect that intrigues the western-educated Kim Jung Un, as both his nuclear program and his lifestyle require an astronomical budget. Although it is too early to say that North Korea will undergo a transformation that is reminiscent of that of China, such a possibility is much higher than what most people imagine.Sources:http://www.bbc.com/news/world-asia-34479606https://reason.com/archives/2015/10/11/north-koreas-grassroots-capitahttp://www.bbc.com/news/business-30812237https://www.washingtonpost.com/news/worldviews/wp/2015/10/16/did-north-korea-really-spend-2-billion-on-an-enormous-party/