Diamonds aren’t rare or special—and hopefully the brutal exploitation that produces them won’t be with us forever.
Since large amounts were discovered in South Africa a century ago, bosses have had to go to surprising lengths to keep their prices high.
Cecil Rhodes arrived in South Africa from Britain in 1870. He moved to Kimberley where diamonds had been discovered in large quantities.
Rhodes’ “skill” was to recognise that the way to maximise the chances of finding diamonds was to buy up lots of land.
He also cornered the market in pumping equipment. He insured this monopoly by sabotaging competitors’ machines.
Rhodes grabbed most of the claims of another gangster called de Beers. This land turned out to be full of diamonds and made Rhodes inordinately wealthy.
Rhodes thought he and Britain had a destiny. He wrote, “I contend that we are the first race in the world and that the more of the world we inhabit the better it is for the human race.”
He emerged just as the scramble for Africa took place. In 1880 most of the continent was still run by Africans. Twenty years later it was almost entirely ruled by rich white people who had snatched 210 million square miles of territory and 110 million subjects.
Growing capitalist competition increased the pressure on Britain to directly take over regions rather than influence local rulers. This imperialist land grab matched the needs of de Beers.
The firm had a critical shortage of black labour. Rhodes once said, “I prefer land to niggers.” But he couldn’t dig diamonds out of the ground without workers.
Seizing land through war broke resistance to working in the mines. It was a brutal process.
For instance, the Ndebele people—the British called them Matabele—sold mining rights to Rhodes. He declared war and crushed them. One of Rhodes’ agents wrote, “The Matabele have been cut down by our machine guns like a cornfield by a reaping machine.”
Once in the mines, diamond miners were kept in closed compounds under guard behind barbed wire. Workers seen as uncooperative were put in chains, stocks and flogged.
When workers finished a contract they were fitted with leather gloves locked at the elbow to restrain their arms.They were given laxatives and shut in solitary confinement for five to ten days to stop them removing diamonds.
In later years bosses mechanised the process. They created a “common latrine”, a long metal trench in which diamond miners are obliged to communally defecate to this day. Now a machine sifts through miners’ shit and detects the slightest particle of excreted diamond.
Rhodes went on to set up the racist state of Rhodesia and lay the basis for apartheid South Africa as prime minister of the Cape Province.
Novelist Mark Twain visited South Africa at the time. He said of Rhodes, “He raids and robs and slays and wins worlds of applause for it. I admire him, I frankly admit it, and when his time comes I shall buy a piece of the rope for a keepsake.”
But Rhodes did not hang—he was knighted.
Others followed Rhodes in a similar manner. Ernest Oppenheimer set up Anglo American to try and leverage a takeover of de Beers in a complex set of robberies.
In the end his family ran de Beers for most of the 20th century.
Oppenheimer pointed out, “The only way to increase the value of diamonds is to make them scarce, that is, to reduce production.”
He decided it wasn’t enough to control production—de Beers also needed to control distribution. It embarked on buying up as much of the world’s diamonds as possible during the recession of the 1930s.
De Beers set up the Diamond Trading Company, which would only sell diamonds to a small group of suppliers. Buyers would come to London to see boxes of diamonds that they could buy at a set price.
This had the advantage of fixing prices and, as they were sold by the box, different quality diamonds could be off-loaded at one time.
Diamonds don’t wear out or degrade. So every time a diamond is dug out of the ground they become less rare.
Over three quarters of diamonds are used as abrasives for metal work and drilling. But the real market in diamonds is at their most pointless, as gem stones.
The complicated process of assigning quality to a diamond is purposefully opaque. It is almost impossible to compare diamonds as like for like. A carat is 0.2 grams of diamonds—whereas in gold a carat measures purity.
Between 2005 and 2012 about 1.053 billion carats were produced. After taking away the industrial diamonds, that is about the weight of six cars.
De Beers’ advertising slogan was “A diamond is forever”. Yet for the first 50 years of the slogan you couldn’t buy a de Beers’ diamond.
The US government challenged the company for being anti-competitive in 1994.
De Beers boss Nicky Oppenheimer argued that the firm “cannot behave as an evil monopoly exploiting the masses, because they do not have a compelling need to purchase”.
Rhodes decided how many diamonds to release onto the market based on how many “licit relationships” could be predicted in any given year. By 1938 75 percent of gem diamonds ended up in US engagement rings.
The company embarked on an early form of product placement. Hollywood screen stars were given expensive diamond rings to wear. Positive stories were placed in the media.
The firm created the idea that an engagement ring should cost a months’ wage. Later they increased it to two months.
When de Beers had an influx of Russian diamonds, it came up with the idea of a ten-year anniversary ring. Then they created eternity rings and three stone rings to deal with the fact that there were fewer marriages.
“All women would like a three stone ring,” the firm claimed. “The stones signify the message of love to the recipient. The first stone, often small, signifies past love. The middle large stone represents present love…”
The legacy of imperialist competition meant that some rulers saw trying to get into the diamond trade as a short cut to enriching themselves or their countries.
What are now referred to as blood diamonds are simply diamonds out of the control of, but in the end sold through, the cartels that run the diamond racket.
The diamond cartels are at the heart of the illicit and legal trade of diamonds.
One consequence of the virtual monopoly was that the trade was unregulated.
De Beers spent fortunes on controlling, repressing or buying up diamond supplies. That meant creating groups of mercenaries to dissuade diamond smugglers.
For instance Sir Percy Sillitoe, former head of MI5, started off as a British South African policeman. He came out of retirement to head a de Beers’ security operation.
Sillitoe invented a Communist conspiracy that ran diamond smuggling around the world. Ian Fleming—of James Bond fame—wrote what purported to be a non-fiction book about it.
The British government lent the retired spook all the spies and money he needed in the 1960s to pursue the entirely fictional red smugglers.
In the last decade and a half de Beers has taken a number of hits. Other mining companies have broken from the cartel.
Canadian and Russian finds have worried the diamond bosses. Lev Leviev, an Israeli millionaire from Uzbekistan and an ally of Vladimir Putin, managed to make a series of deals in 2004.
He bypassed de Beers and drove his personal fortune up to £4 billion. But by 2012 he had lost £3 billion of it.
Also in 2004 de Beers paid out a £10 million fine to get legal access to the US market. As they crowed, it was the deal of the century.
The companies have restructured but the dirt behind the facade remains.
Today most of the world’s jewels are now polished and processed in India by workers in sweatshops. Over 3,000 children breathe the foul air in the diamond workshops.
Meanwhile, last week Sotheby’s showcased a blue diamond they expect to sell for £20 million.
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