This website uses cookies to ensure you have the best experience. Learn more

The History Of The Diamond Cartel And Its Role In Determining The Price Of Diamonds

1350 words - 6 pages

Diamonds have been identified as being precious but expensive gems for many decades. Diamonds were extremely rare, only found in India and Brazil until the late nineteenth century (Vogelsang, 2005: 5). After the discovery of diamonds in South Africa, the diamond industry began to flourish. Diamonds then became very abundant and cheap to produce. In order for the value of diamonds to remain as high as they were during the phase in which they were still rare, a diamond cartel was introduced. A cartel is defined as a group of firms that gets together to make output and price decisions (Cartel Theory of Oligopoly, n.d.). Hence, the diamond cartel aimed to maintain high prices to maximise the profits of the suppliers by restricting the supply. This essay will analyse the history of the diamond cartel, including diagrams that illustrate what the price of diamonds would be with or without the use of a cartel. The notion that diamonds are the only suitable stone that can be used in engagement rings will also be commented on. Furthermore, specific attention will be placed on the role of the diamond cartel in determining the price of diamonds.

In 1867, huge diamond deposits were accidently discovered near the Orange River in South Africa. Cecil John Rhodes arrived at Kimberley Mine in 1874 and eventually began purchasing claims in the surrounding mines. Rhodes established DeBeers Consolidated Mines in 1888 to manage his assets. DeBeers allowed Rhodes and other suppliers to control the all-inclusive supply of diamonds by setting high market prices and regulating the output of diamonds into the market (Spar, 2006: 197). Ernest Oppenheimer gained control of DeBeers in 1929, after the death of Rhodes in 1902. The Central Selling Organisation (CSO) was later established by Oppenheimer. The CSO acted as the principal arbitrator between the stones that were mined and the consumers who would eventually purchase, polish, or wear them (Spar, 2006: 198). Moreover, The Diamond Syndicate was established in 1873. Under the terms of the Syndicate, diamond producers would buy diamonds solely from DeBeers in agreed-upon numbers at agreed-upon prices (Spar, 2006: 198).

The supremacy of DeBeers began to decline from holding 90% of the world’s rough diamond market, during the nineteenth century, to only owning 35% of it today (De Beers fighting to restore monopoly; challenges lie ahead, 2011). This happened because a number of firms were able to permeate the diamond market. When new world-class mines were discovered in Russia, Australia, and Canada, it became increasingly difficult for DeBeers to control the global supply (A diamond market no longer controlled by DeBeers, 2013). The synthetic diamond industry has developed immensely over the recent decades, and has posed as one of the latest challenges to the diamond market. These diamonds are gemesis lab-created diamonds which compose of the same physical and chemical properties, and emerge as rough diamonds. They are...

Find Another Essay On The History of the Diamond Cartel and Its Role in Determining the Price of Diamonds

The Price of Diamonds is Too High

794 words - 4 pages People have different ways of valuing a diamond. Some people look at the sentimental value, and some people consider the price of diamonds in their valuation process. So is it fair to say that the price of diamonds is too high? In this essay I will be discussing the validity of this statement with reference to the market of the diamond industry, the diamond cartel, how the price of diamonds is set, and the implications thereof. Before I analyse

The Price of Diamonds is Too High

1380 words - 6 pages specific attention to the cartel, how it operates; the future of the system and examine what the price of diamonds would be without a cartel system and a brief history on the diamond industry. Furthermore, it shall comment on the statement that the “The Diamond Price is Too High” and analyse why diamond jewellery is the only suitable gift for a wife to be and how diamonds are a symbol for love and romance. Diamonds were accidently discovered in

The price of diamonds is too high

1594 words - 7 pages Diamonds have long been considered some of the most prized and sought after possessions. They have been perceived as indicators of wealth and romance. The diamond market however; has been one of the most controversial and controlled markets in history run by a cartel “…an association of suppliers with the purpose of maintaining prices at a high level and restricting competition” (Oxford English dictionary) formed to prevent the market from

The Modern Diamond Industry: The Price of Diamond is Too High

1256 words - 6 pages Lauren Ledger – LDGLAU001 ECO1010F Essay “The price of diamonds is too high” The international diamond cartel and more prominently De Beers, has used its dominant power and manipulation to create an illusion that has existed in the diamond market since the company was established in the 1880’s. The illusion of diamonds being rare and scarce led consumers to believe that their value would last forever and eliminated the option of resale in

Characteristics of diamonds, how they are formed, and some of the famous diamonds in the world

531 words - 2 pages Someone once said, "A diamond is forever." The diamond is possibly the most sought after of all gemstones, being a symbol of wealth and success. In this report I intend to enlighten your knowledge on the characteristics of diamonds, how they are formed, and some of the famous diamonds in the world.My first topic is the characteristics of diamonds. The diamond is the hardest of all known, natural minerals. Diamonds are typically composed of many

Political Ideologies play a significant role in determining the direction of leisure and tourism policy

2181 words - 9 pages "Political Ideologies play a significant role in determining the direction of leisure and tourism policy" DiscussIntroductionFor this essay I want to focus on policies of leisure from an ideological context. I will be looking at policies that have been created over the years and the views of different political ideologies on them. Different ideologies have different views on subjects related to leisure policy and public policy in general

The Applications and Making of Artificial Diamonds

1690 words - 7 pages in the field. These discoveries have led to machines and processes that make diamond making more efficient and reliable. Of course, all of this research and discoveries would not be sought after if it was not for the many applications of diamonds. This is true for cosmetic, industrial and electronic purposes. Diamonds can be very complex but have many uses. The chemistry of diamonds is very interesting. Diamonds are composed mainly of

The Jury and Its Role in the Courts of Trial

2023 words - 8 pages determining the issues in dispute” (Ellis 2013, p. 133). In this essay I will be discussing the role of the jury system and how some believe the jury is one of the most important institutions in ensuring that Australia has an effective legal system, while others disagree. I will evaluate the advantages and disadvantages of a jury system. A jury system inquires fairness in a court case. A jury is “A group of citizens called to hear a trial of a criminal

The Evolution of Gender Roles and its Role in Society

1996 words - 8 pages an important role in determining the status of males and females: “Female deities governed the earth while male deities ruled the sky” (Fiero). This shows their obvious belief in the importance of men above women, but they still had utmost respect for women as child bearers and givers of life. Moving ahead into the great civilization of Ancient Egypt, women and men had typical gender roles. Women were still seen as child bearers and domestic

The nature of a business and its role in Society

864 words - 3 pages Outline the nature of business and its role in societyThe nature of a business is to produce and sell products, which can be either goods and/or services that fulfil consumers needs and wants in an attempt to earn a profit. Business plays a vital role in society through it providing both economic and social benefits. These benefits include profit, employment, income, choice, innovation, entrepreneurship, wealth creation, and also the quality of

Education and Its Role in the Development of Children

1643 words - 7 pages Education and Its Role in the Development of Children *Missing Works Cited* Education in Britain as changed greatly since World War II, mainly due to the 1944 Education Act, which made secondary education free and compulsory until the age of 15 years. The views taken of education and its importance in national, economic and political terms have varied a great deal since then with each new government: there have been many good intentions but

Similar Essays

The De Beers Diamond Cartel Essay

1323 words - 6 pages of diamonds available has increased over time, prices have remained relatively stable. The essay will show that there are powerful entities influencing the price of diamonds in such a way that the current and recent prices have been much greater compared to what they were and are meant to be. The essay will achieve its objectives through outlining the role of the diamond cartel in influencing the price of diamonds and it’ll seek to highlight the

The Price Of Diamonds Is Too High

1622 words - 7 pages African Pocket Oxford Dictionary: 2002) This raises the question of whether diamonds are actually worth their price. This essay focuses on the origins and the basic theory behind the diamond cartel; the early operation of the cartel; De Beers’ strong market campaign; determining De Beers’ current economic benefit and the true worth of diamonds. Origins of diamond cartel The diamond cartel began in 1888 shortly after shareholders in the diamond

The Price Of Diamonds Is Too High

1207 words - 5 pages of companies in an agreement known as a cartel. This essay will evaluate the diamond market on a microeconomic level and discuss how the diamond cartel came about, what has allowed it to operate for decades, as well as how it determines the price of diamonds. In addition, this essay will, by aid of diagrams and graphs, assess what the price of diamonds would be in the absence of cartels, and demonstrate why the price of diamonds is not too high

The Price Of Diamonds Is Too High

1679 words - 7 pages Statement: “The price of diamonds is too high.” The diamond cartel is the most successful and long-lasting cartel in history. The cartel created a scarcity for diamond and stabilized the prices at a high level. This essay will be discussing the validity of the statement with reference to the market of the diamond industry, history of the diamond cartel, how the price of diamonds is determined, and the implications thereof. “A cartel is a group