“The price of diamonds is too high”
The international diamond cartel and more prominently De Beers, has used its dominant power and manipulation to create an illusion that has existed in the diamond market since the company was established in the 1880’s. The illusion of diamonds being rare and scarce led consumers to believe that their value would last forever and eliminated the option of resale in their eyes. This illusion is also what caused consumers to accept the prices of diamonds, a price that is inevitably too high.
The modern diamond industry was launched in 1867 by the accidental discovery of diamonds in South Africa. This was an industry that would soon be taken over by an Englishman, Cecil Rhodes, who arrived in Kimberly Mine in 1874. Rhodes purchased claims in the mines, and in 1880 he established De Beers Mining Company to administer his holdings. For centuries diamonds had been luxury goods that were essentially for royalty, as the scarcity of the stone is what had given it it’s value, but a sudden increase in diamond production meant that the stone would be widespread. This would inevitably cause the demand for diamonds to fall, as their association with luxury and romance would diminish. Rhodes decided the only way to maintain the illusion of scarcity was to restrict supply and keep the prices high.
In 1873 an agreement between Rhodes and the local distributers was signed stating that they would buy diamonds exclusively from Rhodes and only sell them in agreed upon quantities at agreed upon prices, forming the Diamond Syndicate. This led to De Beers becoming a Monopoly in the diamond industry, and a dominant price setter. The Monopolistic industry meant that there was only one firm, De Beers, which p...
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...o below efficient levels. A deadweight loss to society is usually caused by inefficient production, however in the case of De Beers it is not the production that is inefficient, but rather they decide to restrict supply and stockpile, only offering a limited supply to society. This can be shown graphically by the following diagram:
This means that in the absence of a cartel, the equilibrium, where supply is equal to demand, would be at a higher quantity supplied and a lower price. This is what the diamond cartel is trying to avoid and what would happen if they flooded the market and made diamonds widely available to the masses. This means that through the restriction of supply, the diamond cartel is setting prices above what they should be, in attempt to maintain the idea that diamonds should be considered precious and should be sentimental gifts.
Deep within African mines, elusive diamonds lay enveloped in the Earth’s crust. Possessing much influence, beauty, and tension, nature’s hardest known substance causes parallel occurrences of unity and destruction on opposite sides of the globe. Diamonds, derived from the Greek word "adamas", meaning invincible, are formed deep within the mantle, and are composed entirely from carbon. Moreover, only under tremendous amounts of heat and pressure can diamonds form into their preliminary crystal state. In fact, diamonds are formed approximately 150km- 200km below the surface and at radical temperatures ranging from 900-1300 C°. When these extremes meet, carbon atoms are forced together creating diamond crystals. Yet how do these gems, ranking a ten on Moh’s hardness scale, impact the individual lives of millions of people besides coaxing a squeal out of brides-to-be? These colorless, yellow, brown, green, blue, reddish, pink, grey and black minerals are gorgeous in their cut state, but how are these otherwise dull gems recognized and harvested? Furthermore, how and why is bloodshed and violence caused over diamonds in Africa, the supplier of approximately 65% of the world’s diamonds? (Bertoni) The environmental, social, and economic impact of harvesting, transporting, and processing diamonds is crucial because contrary to popular belief, much blood has been spilled over first-world “bling”.
DeBeers had the buying power to control over 80% of all mined diamonds. They also through cleaver strategic planning had control over most of the diamond cutting and polishing industry.
Based on the integration of a cartel of its type in the diamond market, I see it fit to say that the price of diamonds is set above what is reasonable. This essay will expound the role of the diamond cartel in cinching the high price charged by all those involved in selling diamonds. (Levenstein, Suslow, 2008: Cartel) states that cartels are agreements or associations between or of firms, with the aim of fixing prices and/or limiting output. These can operate in multiple ways, from rigging auctions, to separating their firms far from each other, making it seem as though they are the only supplier of a specific commodity within a certain area and thus limiting supply within their respective area. On average, cartels last just about five years and then end, often as a result of legalities, seeing as cartels are most commonly illegal.
For the past 112 years, De Beers has dominated the diamond industry. Established in April 1880 by Cecil John Rhodes and his partner, Charles Dunell Rudd, De Beers rose to prominence, merging with Barney Barnato’s Kimberley Central Mining company and acquiring more and more mines (Hauser, 2002). The ...
In “ “Blood Diamonds” and Africa’s Armed Conflicts in the Post – Cold War Era, “ Orogun (2004) said that diamonds are referring as “clean stones”. This article explains about the black market is really happening in African. I am using this article to support how the black market of diamond trades is still not regulated, and they defined it as “licit” trade.
Final contribution of de beers to the diamond pipeline is the promotion of diamond jewelry for the industry; through advertising campaigns developed from extensive market research; trade promotional activities and jewelry design competitions
Some of the highest producing diamond mines are countries in Africa. Countries that had some of the highest rate of conflict were Angola, The Democratic Republic of Congo, Sierra Leone, and Liberia. The ...
It’s hard to imagine that a mineral could be fueling wars and funding corrupt governments. This mineral can be smuggled undetected across countries in a coat pocket, then be sold for vast amounts of money. This mineral is used in power tools, parts of x-ray machines, and microchips but mostly jewelry. Once considered the ultimate symbol of love, the diamond has a darker story. "Blood" diamonds or "conflict" diamonds are those mined, polished, or traded in areas of the world where the rule of law does not exist. They often originate in war-torn countries like Liberia, Sierra Leone, Angola, and Côte d'Ivoire were rebels use these gems to fund genocide or other questionable objectives. Even with a system known as the Kimberly process which tracks diamonds to prevent trade of these illicit gems, infractions continue as the process is seriously flawed. The continuation of the blood diamond trade is inhuman, and unethical, and in order to cease this illicit trade further action to redefine a conflict diamond, as well as reform to the diamond certification prosess is nessasary.
Out of all the earth’s major natural resources, diamonds are the most sought after and most mysterious. Throughout history, the virtuosity and resistance of diamonds have caused fighters and lover’s great pain and happiness. For centuries, the value of the diamond commodity became increasingly popular. However, it wasn’t until the mid 1900s, when diamonds permanently made their signature as the world’s most indispensable symbol of love and affection (Howard, Vick 2008). Soon after, diamond rings became the 21st century standard of engagement rings. Without a doubt, everybody in society knows how valuable this commodity is. Nonetheless, what truly makes this commodity more valuable are the stages it goes through from the diamond mines to th...
Santarossa, B. (2004, January 13). Diamonds: Adding lustre to the Canadian economy. Retrieved November 06, 2017, from https://www.statcan.gc.ca/pub/11-621-m/11-621-m2004008-eng.htm
[5] Diamond Industry Annual Review, De Beers Signs New Angolan Agreement, [internet] Accessed on: 13th November 2005, http://www.pacweb.org/e/images/stories/documents/addendum%20angola%202005-english.pdf
The value of diamonds lies on their physical properties that make them suitable for many applications. Natural diamonds are only of high value if they are scarce in nature. Realizing this, De Beers Consolidated Mines was formed to control the supply of diamonds from mines across the world. The diamond market is influenced by mine production, rough diamond distribution, preparation/cutting, and retail markets. The project will be concentrating on the retail markets for diamonds and other high end jewelry.
The film marker is trying to raise awareness of the illicit conflict diamond trade and reinforcing the Kimberley process1 and showing how it will stem the flow of conflict diamonds. This is successful mainly due to the public outburst after the movie. The great impact of the movie has caused diamond companies like De Beers2 to start a pre-emptive PR (public relationship) campaign, even before the movie was released to inform people that their diamonds are conflict-free.
The third determinant of the diamond – related and supporting industries looks at the industry suppliers and...
Diamonds were created million years ago, when the earth was formed, the material experienced pressure of 5million times the atmosphere at sea level and temperatures between 1000~1200degreesC. These conditions caused carbon in the layers inside the planet to crystallize into diamonds. The diamonds moved up to the earth’s surface through volcano eruptions. This is why many Diamond mines are near volcanoes. Diamonds occur in two types of rock: Kimberlite and Lamprolite. Diamonds are mostly found in South Africa, India, Brazil, Russia, Australia, and Arkansas. Right now about 100million carats are mined each year. Today the largest cut Diamond in the world is the Cullian I at 530.2ct .