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Diamonds

Diwali and the gift-giving season may be over, but soon it will be Christmas. And the advertisements for various gift items will continue into that season.

Among the most noticeable ads are the ones for jewellery. Of these, the ads for diamond jewellery stand out. If they are anything to go by there must be a lot of people buying diamonds as gifts to show their love.

Yet, it’s only in the recent past that the giving of diamonds as gifts has become popular among the middle classes.

Diamonds have always been a sign of prosperity and romance. They’re supposed to be what every woman wants. There are movies, songs and catch phrases about diamonds -- ‘diamonds are a girl’s best friend’, ‘diamonds are forever’ -- all of which emphasise the expense, glamour and desirability of diamonds. Western movies have taught us that if a man proposes marriage to a woman he has to do it with a diamond.

But for all their sparkle and desirability, diamonds have a history of misery behind them. The way they are mined, polished and made into expensive jewellery is not a story about beauty, romance or adventure, but of greed and marketing.

Until around 100 years ago diamonds were found only in a few riverbeds in India and in the jungles of Brazil. The total amount of jewellery made from diamonds would have been only a couple of kilograms. They were just one of the many gemstones used in jewellery; no one thought of them as being better or worth more than the others. If you wanted to use a red stone you used a ruby, if a clear or yellow stone, a diamond.

Then, in 1870, diamonds were discovered in South Africa. These mines had so many diamonds they could be mined in tonnes! This dropped the price of diamonds and people who owned the mines started to get worried since the price of diamonds depended only on their scarcity value, not because they were beautiful in themselves, unlike the other gemstones. They were especially worried that if more mines were found, diamonds would become semi-precious stones instead of precious ones.

So the diamond mine-owners all got together and formed a club (or, as it’s known in business, a conglomerate) to control the production of diamonds. Every year, no matter how many diamonds they mined, they would release only a certain quantity to the public at a time, to ensure an artificial scarcity of the gems. The rest were stored. The conglomerate these diamond mine-owners formed was called De Beers, which soon became one of the most powerful companies in the world, controlling nearly all aspects of the diamond industry. At one point, De Beers owned not only all the diamond mines in southern Africa but diamond trading companies all over the world too. Even now, 60% of all diamonds and diamond deals are theirs. De Beers also controlled the smaller companies that cleaned and polished the diamonds, not by owning them outright but by tightly controlling how much they processed and who they sold the polished diamonds to. If these small diamond-processing companies did anything to upset De Beers, they would be given less diamonds, even none, forcing them to toe the company line.

‘Cartel’ is the name given to an organisation made up of producers of any commodity, which is created to stop competition by controlling the production and distribution of that commodity. De Beers became an extremely powerful cartel. So much so that unlike any other commodity, diamond prices have never ever dropped since the opening up of the South African mines.

Diamonds that have been mined, polished and turned into gemstones from their rough state are sold on 24 international diamond exchanges called ‘bourses’. This is also a tightly controlled step in the diamond supply chain; wholesalers and retailers are able to buy relatively small lots of diamonds, which they make into jewellery and sell to the public.

De Beers also took over the marketing of diamonds. This was a great move: not only did they control the supply of diamonds by owning the mines, they also actually created and influenced demand through advertising. With the help of some very good advertising agencies, De Beers created an image for the diamond as something that was rare and expensive and represented wealth, elegance and romance.

In fact, the western ‘tradition’ of giving a diamond ring as an engagement ring did not exist before the De Beers strategy. Women were actively encouraged through ads to view diamonds as a prerequisite to any romantic marriage. Diamonds were placed in movies and given to movie stars to wear at special occasions. The slogan ‘diamonds are forever’ was also designed so that people would not resell their diamonds, seeing them instead as something that symbolises eternal love.

Apart from powerful marketing and the resulting social pressure, one of the biggest problems with diamonds is where they come from. Nearly half of all diamonds originate from central and southern Africa -- countries like South Africa, Namibia, Botswana, the Democratic Republic of Congo, Angola, Tanzania and Sierra Leone. Some of these countries are at war, either with other countries or in a state of civil war, with various violent paramilitary groups fighting each other and controlling certain parts of the country. Many of these armed groups are just criminal gangs that have taken control of the diamond mines, using the proceeds from diamond sales to finance their operations, especially the buying of guns and other weapons. The mines these gangs own are often mined by forced labour.

Diamonds are not like currency or cheques since they cannot be traced. They are also much lighter than gold of the same value, making them extremely easy to smuggle. And people who sell illegal weapons prefer being paid in things that cannot be easily traced. In many cases, if these diamonds were not available the rebel groups would not have been able to buy weapons and, perhaps, there would have been no war!

So in a way, diamonds are responsible for a lot of death and destruction and diamonds sold through this process are known as ‘conflict diamonds’ or ‘blood diamonds’. You cannot really tell by looking at a diamond where it was mined, so it is very difficult not to end up buying ‘blood diamonds’.

After getting a lot of bad publicity, the diamond industry tried to do something about this by starting the Kimberley Process in 2002. The Kimberley Process tries to provide documentation and certification to diamond exports, to ensure that conflict diamonds do not get mixed up with normally-mined diamonds. Sadly, however, the Kimberley Process does not work very well because smuggling diamonds across badly controlled African borders is pretty easy, and, after they are smuggled, fake certificates can easily be attached to them.

-- Manoj Nadkarni

InfoChange News & Features, December 2006

 
 
   
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