DeBeers and Beyond: The History of the International Diamond Cartel

Diamonds are forever
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A gemstone is the ultimate luxury product. It has no material use. Men and women desire to have diamonds not for what they [diamonds] can do but for what they desire.1

To hear these words from a person who attributes his entire wealth and power to the trade of diamonds illustrates the peculiar nature of the diamond market: Jewelry diamonds are unjustifiably expensive, given they are not actually scarce and would fetch a price of $2 to $30 if put to industrial use. Still, by appealing to the customers' sentiment, diamonds are one of the most precious luxury items and enjoy almost global acceptance. This fact is often attributed to the history of one company. DeBeers, founded by Cecil Rhodes in 1870. Debeers has been a highly successful and effective controller of the diamond market, having developed a unique purchasing and marketing cartel that has influenced prices in the market virtually undisturbed for almost a century. Lately, however, there are signs that more and more players seem ready to challenge DeBeers' dominance, and ever since, DeBeers has struggled to keep the cartel intact.

Diamonds and the Cartel

For centuries, the only two countries producing diamonds were India and Brazil. Up to the middle of the 19th century, the world supply of diamonds was so scarce that even monarchs and noblemen found it hard to get hold of them. The idea of making diamonds available to the general public seemed unthinkable. When diamonds were first found in South Africa in 1867, however, supply increased rapidly, although the notion of diamonds as a precious and rare commodity remain to the present day.

Similar to the gold miners in California, diamond miners in South Africa tended to rush to the latest findings.2 As a matter of principle, diamond miners preferred to work by themselves. However, the scarcity of resourceful land and the need for a minimum of common infrastructure forced them to live together in limited areas. In order to fight off latecomers and to settle disputes, Diggers Committees were formed and gave out claims in a region. Each digger would be allocated one claim, or, at most, two.

Since digging diamonds on a larger scale was virtually impossible for individuals, small claimholders soon merged into larger ones. Moreover, equipment for digging, hauling the dirt up and pumping water out of the mines was purchased or rented by groups of miners, thereby forced to cooperate even more intensively.3 Cecil Rhodes was one of the first businessmen to rent out pumping equipment and soon realized that he had tapped a vast market potential. He reinvested the initial proceeds from equipment rental in acquiring claims. By 1880, he held a large enough share of diamond claims to justify a separate company purely concerned with managing the mines: thus DeBeers Mining Company was created. By 1887, the company was the sole owner of South African diamond mines.

Concurrently, Cecil Rhodes took control of the distribution channels through "The Diamond Syndicate," an alliance of merchants in Kimberley who abided to Rhodes' terms of business, recognizing that their own interests and DeBeers were compatible in that both aimed for high prices and a notion of scarcity.

You can read the rest of the story of DeBeers Diamond Cartel

How to Care for Your Jewelry

Jewelry is a substantial investment and therefore great care should be taken to keep your fine metals and gems looking bright and sparkling.

· Remove your jewelry when cooking, deep cleaning or gardening. Chlorine can damage and discolor the mounting on your jewelry.

· Remove jewelry before showering. Soap can cause a film to form on karat gold jewelry making it appear dull and dingy. By preventing the formation of this film you reduce the occasions your jewelry will need to be cleaned.

· For protection of your jewelry and for safety reasons jewelry should be removed when working around machinery with movable parts.

· Have your fine jewelry inspected annually by a professional. Inspection will insure that deep crevices are cleaned and settings are solid and secure preventing loss of valuable stones.

· Clean your jewelry as needed using jewelry cleaner made especially for this purpose or with a non abrasive soap or mixture of ammonia and water mixture. Use caution when cleaning jewelry to avoid damage to your precious metal. A soft chamois cloth is an effective way to keep your pieces shining and your jeweler can give you specific advice as to which commercial cleaners are available and suitable for your needs.

· A soft, discarded toothbrush is ideal for cleaning jewelry as the bristles will get into tiny spaces where dirt likes to hide and the brush accustomed to cleaning delicate surfaces is designed to clean without scratching.

· Sterling silver will oxidize and tarnish unless covered with a protective layer of rhodium to help prevent tarnishing. Over time this covering may breakdown. Commercial polish will restore the original color and luster. However, you may also clean sterling silver by mixing mild soap, water and a drop of ammonia and wipe with a clean soft cloth. Never use vinegar on sterling silver.

· To clean stainless steel simply moisten a cloth with undiluted white or cider vinegar and wipe clean.

· Take special care of silver jewelry making sure it does not come into contact with swimming pools, hot tubs or the ocean. Silver will react with chlorine causing discoloration and then there is also the issue of loss at a public pool or in your own filter system.

· Pearls should be kept away from chemicals including hairspray, perfume and detergents. Use fragrance and hair products prior to donning pearls. Pearls when cleaned should be done so with a mild soapy water solution and rinsed well, never put in an ultrasonic cleaner. Before storing you pearls, wipe them with a soft, damp cloth to ensure that they remain free from any harmful buildup. Pearls are easily scratched and should be stored in a soft cloth pouch or in a separate lined jewelry box to avoid being bumped by other jewelry. If you wear your pearl strand several times a week, consider having your jeweler restring it once a year to prevent strand breakage. Pearls aren’t just for formal occasions they look just as fashionable when you’re having a “dress down” day.