C) Global Flows

The Agents of Capitalism are both Young and Old: The Flows and Profits of the De Beers Global Diamond Trade System

 

Post-mining, rough diamonds have typically gone from the De Beers South African mines to the De Beers Trading Company (DTC) in London, where they are sorted, valued and sold to an elite group of entrepreneurs known as “Sightholders” (Cahill). In 2012, however, De Beers shifted the sorting and trade of rough diamonds from London to Botswana, the world’s largest supplier of diamonds by value (Bloomberg). From this new location, then, Sightholders purchase rough diamonds and then transport the gems to other locales—such as Antwerp and India— where they are re-sorted and repackaged for cutting and polishing or sale (Cahill).

DTC Botswana–this picture depicts close inspection of a recent shipment of Diamonds from one of De Beers’ mines

 

Globally, the majority of the flow of diamonds adheres to the will of De Beers and its monopolistic cartel and is orchestrated through the channels they desire. Within countries, the flow is much more ambiguous, especially in countries where De Beers is less involved. There, diamonds are mined in remote areas and switch hands repeatedly, with little governmental oversight occurring at any stage of the process (Hummel).

Most rough diamonds (70-75% of the global supply, as previously mentioned), though, end up in De Beers’ hands. It is because of this stranglehold on the supply of diamonds that De Beers has been able to construct a trade system that ensures a consistently high price and value for the diamond. This system is grounded in the “illusion of scarcity” (Spar, 201), a notion that refers to the fact that the diamond is seen as scarce and, therefore, valuable only because of the efforts of De Beers and its cartel to construct the image of the diamond as such via mechanizations like effective advertising and the restriction of the global supply.

This system, committed to the accruing of maximum profit within one monopolistic entity, shares many similarities to the patent system dominated by Western pharmaceutical companies, another monopolistic-type entity with immense clout on the global stage. Within the patent system, big Pharma companies operate in much the same way as De Beers in regard to pricing structure. Like De Beers, big Pharma wants to maximize their global profits, so they focus on maintaining the integrity and stability of the existing patent system because it maintains an immensely profitable, high global price for drugs (Kaplan et al., 3). Big Pharma, then, avoids activities like pricing drugs for developing country markets because doing so would “set a low price precedent that would increase demand in wealthy countries for similar low prices” (Kaplan et al., 3). Drugs, thus, stay expensive globally because big Pharma has the intent and influence to keep them as expensive commodities that are agents of immense profit. Diamonds work the same way. They maintain a high price because De Beers has the desire and control to continually reinforce a global trade system that ensures a high-priced diamond that is enormously profitable for the company.

Graph depicting diamond prices (albeit, of a very specific diamond) since 1960. As you can see, prices have not only stayed at a high price but have increased steadily as well–with a significant increase emerging in the 2000s. 

 

As previously mentioned, the stability of this system has been threatened, in recent years, by the emergent “blood diamond” challenge in Africa. The international response to this issue has been the establishment of the Kimberley Process, which is a voluntary protocol designed to guarantee that diamonds going down the commodity chain are “conflict-free” (Hummel, 1159). Nations that participate in this program are required to ensure that imported diamond shipments possess a Kimberley Process Certificate, which verifies the diamonds come from a non-conflict region (Hummel, 1159). Without such verification—as well as adherence to the other elements of the protocol—imported diamond shipments are rejected or impounded and violating countries are made subject to certain sanctions (Hummel, 1160). As a whole, the program has been a success: more than 99 percent of diamonds are traded under the Kimberley process and, therefore, are “conflict free” (Hummel, 1167).

The 49 Member States of the Kimberley Process

 

While the global flow of diamonds might be deemed “conflict-free,” the diamond trade is still intimately tied up with conflict, having intimate level problematic impacts on the lower-rung players on the global stage (i.e. the people of the Global South). For one, the profit-promising nature of the diamond on the contemporary global market has motivated large amounts of migration within global South countries to diamond-producing (i.e. mining, cutting and polishing) locales (Hussein).

Child Laborers Shoveling in the Yellow Dirt of a Diamond Mine in Sierra Leone

 

Much in the same way as (mainly male) youth have attempted, in recent years, to migrate out of Honduras to the United States in search of a better life situation, people both young and old have flooded into diamond-producing areas, hoping to capitalize on the value of the diamond and break away from the poverty in which they and their families are entrenched. The specifics of migration involved in both cases might be different—in Honduras, for instance, the migrants are attempting to escape inevitable violence and death, whereas in diamond-producing countries, the migrants are attempting to transcend their financial limitations. However, the grander intentions motivating the migration in both cases is the same, or at least very similar. Both involve a desire to escape one’s current personal reality for a better one somewhere else.

At the same time, diamonds have also distinctly impacted youth within the blood-diamond regions of Africa. Many children have been abducted from their villages and been forced by the government to engage in the civil wars of their countries (Hummel, 1145). Given that the illicit trade in blood diamonds funds these conflicts, it becomes clear that the diamond and its value undergirds this forced flow of youth into conflict.