The place for a new monopoly

Elena Levina

Have you noticed that a significant part of analytical articles published lately contain this phrase, “… Since the time the diamond monopoly of De Beers ended…“? Time and again, experts recall this, regretfully mulling over the decline in consumer demand, the recurring downturns in the market, the volatility of prices, and the need for generic marketing.

Since the last week was not rich in events, we decided to have a little distraction and indulge in fantasies. Actually, if we all recognize that the diamond market was much more stable and predictable under monopolistic control, why not bring it back?

We would like to warn our readers in advance, that everything described below is only a figment of the author’s imagination. Which, however, does not prevent anyone from using it to one’s benefit.

The monopoly had a number of undeniable advantages. First, it allowed De Beers to fully control the supply of diamonds. A certain part of rough was mined at the company’s own diamond fields, while another part was bought by De Beers from diamond-producing countries and sold off its own bat. In general, it was absolutely unimportant who was mining diamonds and how much – in any case, they were all sold through one single channel.

The control over diamond sales made it possible to always keep diamonds in short supply. No wonder De Beers founder Cecil Rhodes is credited with allegedly saying that if there were only four people in the world wishing to buy diamonds, it should be done so there were enough diamonds for only two of them. Diamonds supplied to the market were measured out in doses, and their price was always high. Surplus stones went to the stock until better times, and this stock also could not reach the market without the monopolist’s will.

Thirdly, the control over supply and marketing programs permitted to shape demand not only for diamonds, but also for specific goods. For example, when De Beers started selling Russian rough containing many small-size diamonds, it kicked off a fashion craze for the Eternity Design, which was not a classic ring with one large stone, but a ring graced with several small diamonds set in a row.

And, of course, the monopolist in any case remained in profit, which it received almost from everywhere – from selling its own stones and from reselling stones bought from other miners.

The monopoly of such a configuration is no longer possible in the modern world. To begin with, there is simply no one able to accumulate enough money to buy up all the diamond-producing capacities on this planet. And even if a financial miracle suddenly happens, such a “deal of the century” will be immediately precluded by numerous antimonopoly bodies: in the age of market economy it is forbidden to concentrate all resources in one’s hands dictating prices for commodities.

In addition, African countries, which used to gladly give their mineral wealth to Western companies, are now increasingly adhering to the policy of resource nationalism. Even the historical partners of De Beers, Namibia and Botswana, have won the right to independently sell part of the extracted rough. And it is even more difficult to expect complacency, for example, from Zimbabwe, which in recent years, on the contrary, nationalized all the diamond deposits in the country.

You might ask, how can one control the market inhabited by over a dozen of diamond mining companies, a dozen of trading floors, hundreds of dealers and thousands of manufacturers?

That’s how:

The place for a new monopoly


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Source Rough&Polished