its time, to keep online records. i rest that email i no longer trust. i grumble.
so,
here is my paper about de beers. do enjoy it..... i whacked myself many much while attempting to write it. my true inspiration is the movie: blood diamonds. yeaaaaaa. i love that movie!
i shall now entitle it,
"Unruly thoughts, Diamonds, Ethics"
and so, here it is:

What is the true value of a diamond?[i] Is it just the monetary price? The labor expended to find it? The labor expended to cut and shape it in an appealing manner? Perhaps the negative effect it has? That is a question that has been raised as society now contemplates the situation of De Beers in the diamond industry, with their control over the diamond trade. De Beers Consolidated Mines, Ltd is a merger of major investors in the diamond mines. These are the people who have realized that to control this diamond supply they would have to cooperate with each other. Their merger resulted in a cartel “powerful enough to control production and perpetuate the illusion of scarcity of diamonds.”[1] This happened in 1888.

Records have shown how De Beers has applied very effective marketing, selling the diamond as a necessary luxury good. They have fused it with human emotion, integrating it further into human society tradition. Their marketing line: “diamond is forever” and other such advertising campaigns they have embarked on has revolutionized the global view point on diamonds with very effective marketing. One example of such a culture revolution is how Asian societies, who have not had a tradition of sealing an engagement or wedding with a diamond ring, are now expectant of a diamond engagement ring. As quoted by Edward Jay Epstein from his article in ‘the Atlantic Monthly’: “The diamond invention—the creation of the idea that diamonds are rare and valuable, and are essential signs of esteem—is a relatively recent development in the history of the diamond trade.”[2] The article “the Diamond Business Gets Rough” by Bristol Lane Voss addresses the situation of De Beer’s dominance in the diamond industry and takes the stand that “De Beer is the diamond industry”.[3] Voss handily provides a concise overview of the diamond industry, and most importantly draws attention to the high superiority of the De Beer state of affairs.

To further the point on this perceived rarity, it should be noted that De Beers has created in a sense, gilded picture of diamond value. It could be said that De Beers, in marketing actions, and how it has morphed human perceptions on diamond significance, has in a sense masked and confused the idea of a diamond in the eyes of many consumers.

In the past, the diamond had been a luxury only the rich aristocrats could afford. Then, diamonds were rarely found, and then only in certain locations in Brazil and India. The world’s production of diamonds were then only a few pounds per year, until the late 1800s when major diamond mines were uncovered in near the Orange River, in South Africa. The diamonds found there were soon being scooped out by the ton, and the world’s diamond market supply increased drastically. “The British financiers who had organized the South African mines quickly realized that their investment was endangered; diamonds had little intrinsic value—and their price depended almost entirely on their scarcity. The financiers feared that when new mines were developed in South Africa, diamonds would become at best only semiprecious gems.”[4]

This event, and many other diamond mine discoveries following, had caused the unrest amongst diamond investors. To safeguard their investment, they needed to keep the price of diamonds high. The simplest way to do so was to control the supply of diamonds into the world market. The fewer diamonds in circulation, the more precious they would be to the consumer, and hence the price of the diamonds would remain high. Thus begins the problem for De Beers, which is the largest diamond trader and supplier to the world. Their careful marketing of the diamond would go to ruins if the price of the diamond plummeted. This could happen overnight. Every moment a new diamond mine had been discovered, the world sees how the diamond is not that much of a rarity.

Being a cartel is in a way dangerous for firms. The general trend of thought is that markets should be free, without inhibition to competition. Competition, after all, is what encourages development in the market and ensures that consumers are not taken advantage of by profit grabbing firms. This also does not allow for infant industries to develop—big multinational companies take over that country’s market, not wanting any competition. And these infant industries are given the opportunity to develop, with such restraint put on them by such powerful firms; in addition, governments may not even have the power to help. So the practice of forming cartels is frowned upon and in some ways outlawed by governments. Therefore, De Beers has had to tread carefully in its quest to make a fortune out of the diamond trade.[ii]

De Beers took many forms all over the world to hide its presence. “In London, it operated under the innocuous name of the Diamond Trading Company. In Israel, it was known as "The Syndicate." In Europe, it was called the "C.S.O." -- initials referring to the Central Selling Organization, which was an arm of the Diamond Trading Company. And in black Africa, it disguised its South African origins under subsidiaries with names like Diamond Development Corporation and Mining Services, Inc. At its height, it not only either directly owned or controlled all the diamond mines in southern Africa but also owned diamond trading companies in England, Portugal, Israel, Belgium, Holland, and Switzerland.”[5]

To bring the focus back to the original matter: it must be established the true value of a diamond and what should be considered a truly precious diamond. There are many classes of diamonds, and only some are considered true gems, rather than just very hard pieces of carbon. The discovery of diamond mines in such an impoverished place as Africa has resulted in civil unrest. Groups of people, be it militia rebels or ones out to strike it rich, invest their energies into acquiring as many diamonds as possible. The process may not be entirely morally correct, and it is from here that the predicament of blood diamonds emerges.

De Beers worries about an oversupply of diamonds. And yet Voss’ article reveals that not all of the newfound mines have quality diamonds. It follows that only diamonds of a gem quality[6] would contest in the market De Beers broods over. The discovered diamond mines in Canada for example, does not produce diamond gems. Thus, if it is as CSO [Central Selling Organization] says that in the long term, only diamonds of gem quality would be prized, they need not worry about the new mines and restricting the supply of diamonds. In essence, it is inferior quality diamonds flooding the market, not diamond gems. What inherently De Beers is doing by buying up diamonds in the market is providing an assured buyer and source of capital for any diamond supplier. This includes those mining diamonds illegally.

From the above follows a point on corporate social responsibility. The Cartel that is De Beers causes detriment to the development of human society. The distraction on diamond esteem and their controlled hike of the true price of diamonds has created a false sense of worth to the diamond. Another significant point to note is that in actual fact synthetic diamonds can be made. Should the consumers feel that the diamond is treasured as a symbol rather than treasured for its properties, then, such a substitution could be made use of. But because of De Beer’s marketing as such that “A diamond is forever”, some have the opinion that governments should step in to regulate this. After all, De Beers has immense powers over the diamond market. Compare this to Organization for Petroleum Export Countries (OPEC), which is in present day facing much objection in their practices, which are similar, if not nearly identical, to De Beers. The products are different, OPEC’s a necessary good, the De Beers’ a luxury good that has been marketed as a necessary luxury good, but the result is the same on human society.

In conclusion, De Beers’ market position and strategy has caused it to be the dominant player in the diamond industry. De Beers’ has had an adverse affect on human society, causing culture and traditional revolution as well as civil unrest. Due to this, they should be regulated so as to rectify the problems it has caused, ergo: quell the blood diamond trade. It could be deduced that, should the stockpile of diamonds in De Beers’ coffers be released into the market, the price of diamonds would fall, but that depends on the true amount of diamonds in the world. If there is not much more than what has been discovered thus far, then the price may not drop much, and may also rise as the limit to the diamond supply is in view and consumers rush to own a diamond for themselves. A diamond is an attractive stone, with a unique property as the hardest substance on Earth; therefore even without the added glory by De Beer, it certainly is a prize, especially one that is of ‘gem quality’.

Bibliography

· De Beers
www.debeersgroup.com

· Ekati Diamonds
www.ekati.ca

· “A Diamond Is Forever”
www.adiamondisforever.com

· William Goldberg Diamond Corporation
www.williamgoldberg.com

· Lucent Diamonds
www.lucentdiamonds.com

· Diamonds: the Real Story by Andrew Cockburn http://www7.nationalgeographic.com/ngm/data/2002/03/01/html/ft_20020301.1.html

· Have you ever tried to sell a diamond? by Edward Jay Epstein http://www.theatlantic.com/doc/198202/diamond

· "The Diamond Business Gets Rough" (Bristol Lane Voss, Journal of Business Strategy, July/August 1998, pp 36-43)

Appendix

wandaywang @ 5/12/2007 01:11:00 PM