The Price of Diamonds Is Too High
For centuries the diamond has fascinated man for its alluring sparkle and physical hardness. Formed about three billion years ago, the diamond may very well be the oldest and most precious item any person can own. The internationally accepted notion that this commodity is one of the most treasurable commodity of them all has led to the public being prepared to pay the prices that are set by a group of companies in an agreement known as a cartel. This essay will evaluate the diamond market on a microeconomic level and discuss how the diamond cartel came about, what has allowed it to operate for decades, as well as how it determines the price of diamonds. In addition, this essay will, by aid of diagrams and graphs, assess what the price of diamonds would be in the absence of cartels, and demonstrate why the price of diamonds is not too high.
Up until the 19th century, diamonds were considered to be one of the most prized possessions that could be found, hence they were reserved only for those who are the heads of royal families. However, this all changed when English-born businessman Cecil John Rhodes bought up diamond fields in South Africa as well as claims to the diamonds and began the company ‘De Beers’, named after two brothers who had found deposits of the commodity on their land, which made it possible for the general public to own a piece of this precious stone – at a high price.
The rough diamond that is beneath the surface must undergo several stages of production before being transformed into the diamond that is used in jewellery. These stages of production are costly and this was the shortfall of many of the diamond mining companies, and thus a merger was formed. The agreement b...
... middle of paper ...
...orms of society that have been set by the successful cartel De Beers and welcomed by the public, a diamond ring is indeed the only acceptable engagement ring – the ultimate symbol of love and romance.
References:
Fog, B. 1956. How are Cartel Prices Determined? The Journal of Industrial Economics. 5(1): 16-23
Goldschein, E. 2011. The Incredible Story Of How De Beers Created And Lost The Most Powerful Monopoly Ever. Available: http://www.businessinsider.com/history-of-de-beers-2011-12?op=1
Kochevrin, I.B. 1979. Cartel Price. The Great Soviet Encyclopaedia. The Gale Group
Levenstein, M.C., & Suslow V.Y., 2006. Journal of Economic Literature. 44: 43-95
Spar, D.L. 2006. Markets: Continuity and Change in the International Diamond Market. The Journal of Economic Perspectives. 20(3): 195-208
Vogelsang, I., 2005. The International Diamond Cartel. EEP. 142:1-9
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”.
In Nicky Oppenheimer's speech, he states that diamonds are a valuable luxury desired by many and DeBeers strives to preserve their value. Furthermore, he claimed that it is essential for DeBeers to "be able to clear the market of all rough diamond production". Other companies who deal with this luxury will be motivated by evil greed, so DeBeers has the duty to ensure that these types of companies will not gain power. From the discovery of diamonds in certain countries in Africa, DeBeers has allowed their economies to drastically grow. Oppenheimer also brings up an interesting point when he compares how similar the diamond and oil industries are with their regulations standards, which lessens the negative views on DeBeers' brand, since they
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
A beautiful precious diamond can last forever, but what most people do not know is that a majority of our diamonds come from Africa. The civil wars in Africa over diamonds began around 1961 and ended in 2003. Conflict diamonds were rampant and it would be difficult to say if any jewelry sold prior to 2003 was conflict free. Conflict diamonds are diamonds that have been mined and were controlled by African rebels. The rebels would use the profits from selling conflict diamonds to fund illegal activity and to purchase more weapons for their armies. While rebels had control of the diamond mines they killed approximately 4 million people and countless families were displaced.
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
iii. India dominates the world’s cut and polished diamonds (CPD) market. In value terms, the country accounts for approximately 55 percent of global polished diamond market and nearly 9 percent of the jewellery market. According to GJEPC's provisional estimate, cut and polished diamonds registered 19.06 percent growth in exports at US$ 7.11 mn.
[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 .