By Mudasir Sheikh
Most of us perceive diamonds as valuable gems found on earth. Usually, something is valuable because of its scarcity and usefulness. Diamonds are neither scarce nor useful for ordinary men/women. Diamonds are found in abundance in mines throughout the African continent, Australia and other parts of the world. Artificial diamonds are easily prepared in labs at a nominal cost and these artificial diamonds are indistinguishable from naturally occurring diamonds. Diamonds are a naturally occurring hardest substance and are mainly used for cutting, drilling and for other industrial purposes. They are useless for ordinary people, but still diamonds are perceived to accord prestige. Diamonds are considered a symbol of love and social status thus everyone wants to purchase these. The question is: How people got so much emotionally tied to something which is useless for them?
The story begins in South Africa around 1880’s when people were selling their diamond mines, as the prices of diamonds were falling because of huge supply of rough diamonds from the newly discovered mines in Africa. When people were selling their diamond mines, a savvy Jewish business man, Cecil Rhodes was buying them. He changed the history of diamond trade when he brought a more established Kimberley mine at a nominal price.
Cecil Rhodes was funded by a Jewish banker Rothschild. Till 1888, only De Beers, which was owned by Cecil Rhodes and a few other firms, were left in South Africa that dealt in diamonds. These firm owners realized that their only option to survive was to consolidate instead of competing between themselves. These small firms merged together and created one giant entity by the name of De Beers Consolidated Mines, Ltd. This huge firm now has a monopoly in diamond industry on the African continent. They set a fixed diamond price, as in 1982, The Atlantic article put it, “De Beers proved to be the most successful cartel arrangement in the annals of modern commerce.”
Cecil Rhodes died in 1902. By that time, De Beers had expanded its operations and owned almost 90% of world’s diamond mines. In 1938, diamond mines were discovered in Western Africa, Australia and Siberia which led to a drastic increase in diamond production and decline in prices. So De Beers contacted N.W. Ayer and Sons, a legendary advertising company in New York. Both of them concluded that USA was a significantly huge and untapped market which could be exploited by simply convincing American people to buy their products. They used movies, newspapers and magazines to create an illusion that diamonds were a symbol of love. More expensive diamond meant more love. Their strategy was simple yet brilliant; they changed the way people perceive diamonds. They attached an emotional value to this product, a desire and an expectation.
Frances Gerry coined the term “a diamond is forever’ to make people to believe that a diamond engagement ring should cost at least two months of salary in order to preserve love for ever. The campaign was runaway success and today it remains as one of the best advertising operations in history. After the advertisement campaign, there was a record growth of 55% increase in sales of diamonds. The aim of the slogan “diamond is forever” was to prevent people from selling their diamond s in the market as it would create a problem in the main sales of De Beers. Because of a virtual monopoly, De Beers was able to maintain its price. They repeated their advertisement campaigns in other parts of the world like in Japan in 1967. Before the advertisement campaign in Japan, only 5% of people was purchasing diamond engagement rings but later 50% started to purchase them with a steady increase year after year.
Now take the case of blood diamonds. Blood diamonds are very synonymous with conflicts that are linked with the diamond trade. Blood diamonds refers to crude diamonds which are used by various militia leaders to launch guerrilla wars against legitimate governments in diamond producing countries. Israel which is committing genocides, extrajudicial executions and assassinations within and outside its territory is very poor in natural resources. It imports petroleum and rough diamonds from other nations to sustain its integrity. But how is it paying for these imports; one way is by blood diamonds.
The government agencies of Israel are involved in smuggling rough diamonds from African countries by bribing government officials in these countries and are also dealing with militia leaders for diamond smuggling. Once these diamonds reach within the territory of Israel, proper cutting and polishing is done by Jewish crafts men. A UN backed certification process known as Kimberley process converts these illegal diamonds into legal ones and then these are sold in international markets all over the world.
Israel has world’s largest trading floors for diamond sale in Tel Aviv where customers from all over globe come and purchase these stones. In 2016 , diamond exports fetched about $4.6 billion to Israel in revenue.
Diamonds are found in abundance in mines all over the world and are easily manufactured in a lab by a process known as Chemical Vapor Deposition (CVD). The supply of diamonds is controlled by cartels mainly De Beers in order to maintain their high price. De beers controls about 90% of diamond production all over the world. As a result, the firm is able to sold them at a very high price. By creating monopoly and savvy advertisement campaigns, they reap huge profits at the cost of people who are caught in their Ponzi scheme.
Industrial diamonds are very cheap costing about ₹150 per carat, on the other hand, a one carat diamond engagement ring costs about ₹1, 00,000. This huge gap in price is a result of cutting, polishing and advertisement for jewelry diamonds. Once someone purchases diamond jewelry it is very difficult process to sell it, as a second hand commodity. Once sold, it will only fetch an average of about 1/5 of its original price. As cutting and grading of these stones is completely unscientific and varies drastically from one factory to factory, it is not possible to set a standard for resale price. That this stone is precious, is simply an illusion created by savvy business men in order to rip off innocent people. If any time in future, you decide to purchase diamond jewelry consider that, by wearing a precious stone you will no longer become any smarter and consider its resale value.
—The author is an MBA and Mphil. He can be reached at:[email protected]