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Culture, Reality

DIAMONDS ARE FOREVER

by Nikhil Gilbert / Illustration by Sasan / 30.07.2014

Diamonds hold a prominent position in the 21st century culture of engagement and courting. Walking through a shopping mall or flipping through a glossy magazine, we will almost certainly come across a slender, elegant, digitally edited model advertising these sparkling gems that are meant to lure would-be suitors into buying ridiculously over-priced stones as tokens of their love, affection and fidelity for their spouses to be. This surely prompts one to wonder what makes these gems so expensive, invaluable, and why many perceive them to be the only suitable gemstone to offer as an engagement ring?

Diamond History
To get a clearer perspective, let’s go back the 1880s where a diamond was actually an extremely rare commodity. Mining at this point was a rare career in the South African region and the lands’ mineral earth was relatively untouched by European settlers. These bright, lustrous gems were only found on rare occasions in rivers and were considered to be a majestic jewel of sorts, only worthy for the crowns and fingers of royalty and nobility. It was at this point however that diamond prospectors had found a massive deposit of what came to be known as Kimberlite ore, which contained diamonds in tonnes. Simply put, diamonds quickly became widely available and the illusion of the diamond being the “rarest of jewels” only reserved for the most prominent members of society was quickly becoming a perception of the past.

This discovery of vast abundance was a threat to the illusion of scarcity that gave diamonds their value. Using a very basic economic theory, an abundance of supply will significantly reduce the quantity demanded for a product and as such, its prices fall dramatically. Think about how much you would pay for something that people were literally picking off the ground by the thousands. This was a day’s work for any man working in a diamond mine.

It was these circumstances that encouraged ambitious prospectors like Cecil John Rhodes to create what is known in the economy as a cartel. To understand the diamond industry in its entirety, one must clearly understand the concept of a cartel. A cartel is defined as a collective of producers and businesses that act together to fix prices, marketing and supply of a particular commodity. When looking at the threat that the price of diamonds faced, one can see how opting to create a unified body of producers that carefully controlled the amount of diamonds that were released on the market was what would come to save the industry and create a legacy and empire that would last centuries.

Uniting all the suppliers beneath one banner was a relatively easy feat as the vast majority of the world’s diamonds came from South Africa, in the town of Kimberley. This made making the unification of producers an easy task for Rhodes. One may ask what would convince everyone who owned a diamond mine to join in under one group, when they could have had it all to themselves? Think of it like this: no sensible prospector would say no to the agreement because if there existed even one supplier that did not fall under the banner of the cartel, supply would no longer be restricted and diamond prices would plummet due to their shear abundance. The only real issues the cartel faced were finding a basis for which they could regulate supply, and finding a way to both maintain the demand created by the former rarity of diamonds and embed this into society on a cultural level.

Creating the Illusion
The company that came to be known as the De Beers Group marketed the diamonds with what was one of the most powerful slogans of the 20th century – “Diamonds are forever”. The cultural phenomenon cultivated by De Beers roots the demand for diamonds in the sentiment of needing a diamond as the medium of exchange for the act of marriage. This elaborate marketing strategy sought to perform one of the most effective techniques in salesmanship, hiding the difference between the cost of a diamond and the worth of the diamond.

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This demand was propagated in all forms of media and advertising throughout the 20th century in music, radio and film. This was especially useful in the 1950s with the rise of cinema and popular actors and actresses who were much admired and even idolised by their fans. This allowed for the diamond cartel to create an exorbitant amount of demand using their newly created cultural ambassadors, while restricting the supply at their leisure. Again, let’s look at simple economic theories of supply and demand. It effectively allowed them to raise the price to a significantly higher level above the commodity’s actual worth due to its perceived rarity. This marketing strategy managed to create a perceived usefulness and perhaps even necessity, in an item that initially had very little practical value to a consumer.

The supply management was equally important to the cartel, as the demand created through the appearance of diamonds being scarce rested on the ability to ensure that people perceived them as difficult to acquire. After the death of Cecil John Rhodes, the Oppenheimer family saw to it that De Beers acquired complete control of all supply and distribution of the diamond trade, further consolidating its monopoly. Following this, the family needed a way of distributing the diamonds to the world in accordance to what’s known as orderly marketing. To do this they created The Central Selling Organisation which served as a sort of middleman of exchange between what was produced by the cartel and what was given to diamond sellers to be sold in shops.

The Current Diamond market
The current diamond market exists as a more fragmented form of its tightly established, monopolistic predecessor formulated by De Beers and controlled by the long lineage of the Oppenheimer family. Despite the well consolidated control of the cartel, their hold on the international diamond trade did not last for long. New findings were made across the world by other companies and the quantity stockpiled by the cartel was diminishing. The cartel still managed to keep a strong hold on its power, but it had to change how it operated. It moved to signing contracts and making agreements with other producers, be it companies or governments, to ensure the supply of diamonds remained within De Beers holdings.

The reason many other suppliers are still keen to join the De Beers cartel, once again, stems from the supply and demand of the diamond market. It works exactly the same as it did 200 years ago. The demand of the diamond rests on the illusion that diamonds are a scarce commodity. Knowing this, all alternate suppliers are happy to join the cartel to ensure that supply remains controlled and prices easily regulated. History left a firm grip on consumers’ perceptions on what it meant to wed the man or woman you love. This perception can be so strong in some cultures that suitors are met with disappointment or even refusals when proposals are not accompanied by the highly overpriced, yet ironically overabundant rock. Today, couples need to ask the very important question of where the meaning of putting a diamond around someone’s finger as a show of everlasting commitment is really rooted.

*Illustration © Sasan

 

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