The Diamond Trade

"Common sense tells us that the only way to increase the value of diamonds is to make them scarce, that is to reduce production" - Ernest Oppenheimer

   It seems absurd, really, that so many die for diamonds, for a shiny, little rock. It’s not that diamonds are so rare. They’re not. It’s said that there are enough diamonds in the world to give every man, woman, and child in America a cupful. The illusion of scarcity is nothing more than a price-fixing marketing ploy. De Beers has a huge vault where they keep most of the world’s supply of diamonds. If they were to place them all on the market, the prices would plummet.
   While it could be argued that high quality diamonds, large diamonds of exceptional clarity with little to no perceptible imperfections, are rare, the majority of diamonds purchased for jewelry are not considered to be high quality. Less than 25 out of every 1,000 diamonds (2.5%) sold in the United States would meet that distinction.

The Diamond Cartel

   In 1888 De Beers Consolidated Mines, Ltd., incorporated in South Africa. Within a year, De Beers negotiated an agreement with the London-based Diamond Syndicate, the results of which fixed pricing as well as regulating sales.  Meanwhile De Beers continued to buy out its competition to become the world leader in the diamond trade.
   Gold, silver, copper, rubber, and grains fluctuate in response to economic conditions. Diamonds, for the most part, have continued to increase in price every year since the great depression. In the past De Beers controlled 80% of the marketplace. Today the company controls 40%, but is reaping more profit than ever.
   De Beers is no stranger to bad press. In 1996 De Beers was under U.S. criminal indictment for a price-fixing case. It was said that executives would not set foot on U.S. soil for fear of arrest.2 In 2004, De Beers pleaded guilty and settled a 1994 charge that they had colluded with General Electric to fix the price of industrial diamonds and paid a $10 million fine to the United States Department of Justice.

Diamond Marketing

   The cold white fire of a well cut diamond is beautiful, but is beauty alone the reason we are willing to pay a high price? Today new processes are creating manufactured diamonds at a fraction of the price. These gems are indistinguishable from natural diamonds, except for one thing—some of them are better, truly flawless.
   Will prices fall? If we can’t tell the difference between natural and manmade diamonds, will we choose the manmade stone? Or will we continue to believe a natural diamond signifies love?
   A diamond is forever. Sheer marketing genius.
   How serious are you about marriage? How committed are you? How much does your soon-to-be wife mean to you? How many months’ pay is she worth? If a diamond is forever, so shall be your love for her. And while you’re out shopping for that diamond, you may get thirsty. Don’t forget to obey your thirst and drink Sprite. And if you get nervous and think maybe this whole marriage thing isn’t for you, look down at your Nikes and just do it! Don’t worry about the price. Bring along your American Express card. Don’t leave home without it.
   Diamonds are not a good investment. If you

sell a diamond you will only get a fraction of what you paid. And older diamonds are worth much less than newer diamonds, thanks to new cutting methods that improve luster and sparkle. All in all, a diamond may be the worst investment one could make, especially considering our divorce rates.

Conflict Diamonds

Aka Blood Diamonds.
   Conflict diamonds are diamonds sold to fund rebel military terrorist groups. Angola, Liberia, the Democratic Republic of Congo, and Sierra Leone (where the movie Blood Diamond takes place) are countries where groups that control the local diamond trade are known for their tyranny.
During the height of the diamond conflict in the 1990s De Beers said that conflict diamonds only account for 4 percent of the global trade. Activists said they represent up to 15 percent. It’s impossible to know for sure, since conflict diamonds are easily smuggled into the legitimate diamond pipeline.
Regardless of whether it’s 4 percent or 15 percent, in a business were price is controlled by perception, the image of a nine-year-old with a machine gun or people with hands missing, chopped off by a military regime supported by the symbol of love, does not

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bode well for business.

Kimberley Process Certification Scheme

Corporate conscience or just marketing?
   In 2003, a process was established call the Kimberley Process Certification Scheme. The Process is designed to certify rough diamonds originate from conflict-free sources. The scheme was set up to assure consumers that by purchasing diamonds from De Beers and other participating diamond wholesalers, they were not financing war and human rights abuses. While most consider this a noble step to insure that diamonds purchased legitimately are conflict free, some believe that this is simply whitewashing an uncontrollable black market industry.
   Three years after the Kimberly Process Certification Scheme was started, the UN reported (in October 2006) that $23 million of conflict diamonds from Cote d’Ivoire alone entered the legitimate market. It turns out that diamonds are smuggled into Ghana and Mali where they are certified as being conflict-free. But to De Beers credit, in 1999, in line with a zero-tolerance policy, De Beers stopped all outside buying of diamonds in order to categorically guarantee the conflict-free status of De Beers diamonds.
   The movie Blood Diamond made millions of

Americans acutely aware of the atrocities caused by purchasing conflict diamonds. And De Beers has benefited from this recent awareness by being able to say that you should purchase their diamonds for ethical reasons, as they are stated to be conflict free. And this has done well to boost De Beer’s reputation as the prestigious diamond company. Image courtesy of diamondboycott.com

Conflict Free Does Not Mean Fair Trade

   The Kimberley Process does not guarantee human rights or environmental stewardship. While purchasing a Kimberly Process certified diamond may mean you have not helped to fund war and terrorism, you may still be supporting worker exploitation and state sanctioned violence. Diamond mining

has a history of horrific abuse, low or non-existent wages, slavery and child labor, and unsafe working conditions.
   The primary diamond deposits (the geological sites where diamonds were formed and are mined from rock) are owned and operated by big business, as massive equipment is required to mine source deposits. The conditions in these mines have vastly improved in the last few years.
   The estimated one million minors who work secondary deposits (areas where diamonds are found after being washed away from primary sources, usually in or near bodies of water) are not so lucky. The average pay is estimated to be as low as one dollar a day. Many work on a commission basis, receiving no pay unless a stone is found. And when one is found, the pay is ridiculously low. For example, a worker was paid $3.50 for a stone the dealer expected to sell for $15,000.00.
   Child labor is common, both as a source of income for the family and as a means for orphaned children to support themselves. HIV/AIDS is rampant in the camps; abject poverty is overwhelming.
   The diamond trade continues to be an industry where wealth is hoarded at the top. Consider the fact that despite a seemingly inexhaustible supply of minerals including diamonds, Sierra Leone is one of the poorest

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countries in the world.

Environmental Issues with Diamonds

   Environmental damage due to diamond mining may be as enduring as the diamond itself. Both primary and secondary site mining wrecks havoc on the landscape. Primary site diamond mining opens massive holes in the Earth and pollutes nearby water from topsoil and mine ‘tailings’ (toxic chemicals) wash into surrounding waterways.

Purchasing Diamonds Ethically

   If you are looking to purchase diamonds with a clean conscious, you can’t go wrong with Brilliant Earth, “The highest quality Canadian Conflict Free Diamond Jewelry™ made with renewed gold and platinum.” From environmental implications to fair labor wages, Brilliant Earth is a safe bet for a sparklingly clean conscious. Or purchase flawless manmade diamonds. A stone equivalent to a $15,000-$30,000 natural stone can be manufactured for as little as a hundred dollars, though they will be priced at whatever the market will bear (much much more). At least you will be 100 percent sure you aren’t contributing to environmental degradation or human rights abuses.
   But even if you buy your diamond from a company like Brilliant Earth, or purchase a manmade diamond, as long as that price tag remains high you are still perpetuating the myth that diamonds are a rare and prestigious commodity, one worth a large

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investment.
   What if we stop using jewelry to define us or to announce our social standing? Isn’t it absurd to walk around with thousands of dollars hanging off our ears, adorning our necks, or wrapped around our wrists? Do women really need their betrothed to spend thousands of dollars on an engagement ring in order to feel valued? No matter how ethically they are sourced, the economic value and the emotional value of diamonds are falsely created. Diamonds remain an iconic symbol of wealth and inappropriate, misplaced priorities.

Sources:
De Beers - Wikipedia.org
The New Diamond Age
Insider Secrets for Diamond Shoppers
The Truth About Diamonds
Conditions Grim in Sierra Leon's Diamond Mines
Excuse Me, There's Blood On Your Diamond
Diamond Trade's Tragic Flaw