Blood diamonds

Blood Diamond

Who finances civil wars, massacres, and slavery in South Africa? Everyone under the influence of De Beers. This dominating force in the diamond business has become an empire as it built a monopoly. Rarely are companies this successful through two centuries. But, De Beers has invested well and created perhaps the most successful campaign of all time - A Diamond is Forever. Nowadays, they have kept the value of diamonds higher than commodities made from gold, oil, and every other natural resource while they obtain the raw materials for very little. Production is overseen properly as well. Meanwhile, De Beers reserve inventory through the Central Selling Organization and control the diamond market. Worldwide, people are exploited by the marketing tactics of the cartel to the point where the company are capable of measuring our enjoyment.

Production and resources

Contrary to common opinion, the discovery of a valuable natural resource in an area where the central power is weak renders a negative economic repercussions rather than positive. Then, economic growth is stunted instead of growing. Civil unrest in many countries, including Sierra Leone, as shown in the film, began and was prolonged because of the struggle to obtain certain natural resources (Olsson, 2004). The diamond empire, De Beers, is the cartel owned by the Oppenheimer family. They are responsible for 90% of the world’s diamonds. Some of these diamonds are conflict or blood diamonds. Many of these originate from rebel groups’ illicit diamond trade in areas not controlled by De Beers. Brutal tactics employed has resulted in countless civilians’ deaths. Over the years, 3.7 million died in Africa’s civil wars (Africa Action, 2000). When a large percentage of the population die, the production possibilities frontier of that area decreases. Thus, the overall potential of the economy decreases in the long-term. Clearly, companies find it easier to acquire their resources from countries that has a weak institution because of their lack of power over preventing corruption within the government. It could be a result of the countries not being ready for such a resource. Because with no strong central institution, there is weak regulation. That is the reason why diamonds are being smuggled and why rebel groups like the RUF succeed in their movements. Over the past century, diamonds’ value as a natural or mineral resource has risen (Olssen, 2004). Thus, the crystals of carbon can be sold for incredibly high prices as seen in the movie, Vandy sold the pink diamond for around 2 million dollars (Olsson, 2004). Without these rough diamonds, commercial diamonds cannot be developed and made. Finished products require necessary resources or inputs. Rough diamonds were being sought for throughout the film (Zwick, 2006). Additionally, production of resources employs human resources or labour which is actually their greatest resource. People could be of market or technical expertise (Cuizon, 2009). The RUF raided villages to gather the natives for human labour. Another essential component of production is capital. The industrial factories where diamonds are modified - cut, shaped, and polished - make use of human-made goods to assist in production. Looking at the marketing role in production, entrepreneurship and technology are significant. De Beers is limiting production to decrease supply and increase the market price of diamond. Also, they fostered an inelastic demand which means they has full control over the price. The company is controlling the resources (diamonds) in the market (the world) to control production. Because rebel groups like RUF supply the De Beers with the factors of production they require, De Beers are the dominant force in South Africa. And that is a problem for the black natives. They, the labourers, are not receiving the income. With the diamond revenue, the RUF rebel groups had funding for their movement to capture civilians to obtain more resources (Olsson, 2004).

Scarcity, opportunity cost

De Beers manipulated the public to perceive the illusion that diamonds are scarce and valuable to increase demand. The public’s desire for diamonds only increased after false marketing using celebrity endorsement in Hollywood concerning the reality of diamonds’ availability and intrinsic value. But, diamonds are not rare. Diamonds are carbon and carbon is everywhere (MacFadyen, 1994). Meanwhile, when people are given the impression that a resource is rare and of value, a decision must be made to sacrifice one good for another. A business like De Beers, or Van De Kaap as known in the movie, used scarcity as an advantage. Through the Central Selling Organization, De Beers propelled people to sacrifice other opportunities for the diamond industry. The profit margin of diamonds became and still is extremely high. Thus, people are willing to overturn their farm land to search for diamonds which means that the overall economy in the area becomes troubled as everyone moved to work in the diamond industry. Other sectors like farming are abandoned. The land that could have been used for farming or schools were turned into diamond mines. Better education or alternatives to mining for a living were the opportunity cost. Not to mention, the country’s possible production frontier could have increased due to an increase in social well-being. However, most people used their efforts to enhance a industry where they have no control because only a select few have power (MacFadyen, 1994). Natives of South Africa like Danny Archer started to earn their living in the diamond trade because of the high stakes. Natives were willing to forfeit all other forms of earning money in harvesting diamonds. Ultimately, De Beers gains human labour, land, and natural resources. The sacrifice is many lives and eventually, civil wars. As seen in the movie, it is due to battle between the government and rebel groups whose aim was to become wealthy by enslaving natives to work in diamond mines (Zwick, 2006). Unfortunately, the government was overpowered by the RUF in Sierra Leone. But, the RUF did not want to rule the country, they only wanted the diamonds (Olsson, 2004).

Utility

One of the primary reasons diamond companies like Van De Kaap or De Beers feared the marketplace being saturated with diamonds and tried to restrict the amount sight holders had to sell is because of utility. As quantity of a good increases, satisfaction or utility experienced by consumer decreases. Rarity is key to diamonds’ value. De Beers will calculate the number of marriages worldwide and adjust the amount they will distribute to sight holders accordingly (MacFadyen, 1994). They aim to hit perfect peak to maximize utility. Reaching that peak increases their profits and growth in popularity. Even the high price of diamonds do not lower demands to indulge on them. The worth of diamonds symbolizes the value of the receiver to the giver. Thus, if many people are able to afford diamond jewelry for very little, then the symbolism of diamonds as wealth, prestige, love and devotion will become non-existent. Once diamonds are saturated into the market, the price will decrease (Emerling, 2000). Thereby, decreasing utility which has never happened to diamonds. The precious and eternal qualities of diamond relies on the Central Selling Organization to restrict the quantity available to the sellers and in turn, the buyers. In Blood Diamond, Archer claims that De Beers has control over mines in Sierra Leone to prevent an abundant supply of diamonds into the open market which can undermine control of the cartel. But, De Beers’ influence is much deeper. They indirectly created the environment in Sierra Leona. Due to diamonds’ high utility, Sierra Leone’s inhabitants gave up other sectors for the diamond industry. That created an imbalance and therefore, a decrease in PPF which contributes to their declining economy. Furthermore, the marketing campaign - A Diamond is Forever - would not have worked if utility was not maintained throughout the century by the CSO. In a short period of time, demand would have decreased. Diamonds would have lost their status symbol and all the sentimental reasons for which people purchase them (Emerling, 2000).

Whether the De Beers’ grip on the world will loosen is still unknown. Meanwhile, consumers can change their viewpoint on the importance of diamonds in our culture to reduce utility. All the while, the De Beers will be less likely to create artificial scarcity for the public who are not disillusioned anymore. Effects on the African economy will be seen immediately as production will decrease and those who left behind their families to pursue a life of wealth will return to where they belong. Soon enough, there will be workers in the fields and the natural resources sector will not be limited to diamonds. Although the diamond industry should continue, Africans must be depend solely on it alone. To prevent smuggling, De Beers should stop buying indirectly from countries like Liberia and set up offices where diamonds are mined. In places like Sierra Leone, theft and corruption would greatly decrease if De Beers bought diamonds of local origin. Hopefully, other sectors (i.e. farming) will become established to replace mining and build a more stable economy. The crucial factor is not in the economics, but in the politics. South Africa is in need of good governing and new reforms. Natural resource issues originated from the leaders who cared only for themselves, and neglected their fellow countrymen’s needs (MacFadyen, 1994). In Sierra Leone, the new president has to promote Sierra Leone’s institutional capacity for conflict prevention and be able to take charge of the country. First, any rebel movement must be stopped. With little control, the RUF did what they liked and caused many deaths and long-term decrease in resources. The country needs leadership and in particular, the desire for change and someone to bring about their hopes. Establishing the rule of law would enhance human security and bring the continent peace. The civil society require an able police force as well as a well-trained army. With that said, employment is the biggest problem South Africans face. Sustainable land reclamation projects could be started. Creating alternative livelihoods for the natives is also necessary to rebuilding South Africa and stopping diamond mining altogether (GPF, 2007). The natives have survived before the diamond trade, and must be dependent of it while continuing on living.

Works Cited

Africa Action (2000). Africa Policy. Retrieved March 6, 2009, from <http://www.africaaction.org/docs00/dia0007a.htm>

Blood Diamond. Dir. Edward Zwick. Perf. Leonardo DiCaprio, Djimon Hounsou, and Jennifer Connelly. Warner Bros. Pictures, 2006.

Cuizon, Gwendolyn (2009). What is Production. Retrieved March 6, 2009, from <http://product-quality-control.suite101.com/article.cfm/what_is_production>

The Diamond Empire: Oppenheimer family's cartel, Artificial scarcity. Dir. Gavin MacFadyen. With Edward Epstein, Thomas Helsby, and William Goldberg. WGBH Educational Foundation, 1994.

Olsson, Ola (2004). Conflict Diamonds. Retrieved March 6, 2009, from <http://www.ioes.hi.is/events/DEGIT_IX/Papers/Olsson.pdf>

Emerling, Susan (2000). Not Forever. Retrieved March 6, 2009, from < http://archive.salon.com/business/feature/2000/09/27/diamonds/print.html>

Global Policy Forum (2007). Peacebuilding Efforts in Sierra Leona Must Address Natural Resource Goverance. Retrieved 7, 2009, from <http://www.globalpolicy.org/security/issues/sierra/2007/1010gwpbcs.pdf>