Everyone knows that diamonds are a girl’s best friend. But few are aware of the remarkable saga of the De Beers diamond cartel, and that our current perception of diamonds as something of extraordinary value has been created with smoke and mirrors. Because of De Beers’ cunning and steadfast control of the global diamond market, the company has won it the not-so desirable recognition as “the most successful cartel” in modern times. But when you add to it the diamond czars’ adroit use of brilliant Madison Avenue spell-casters to ensure the cartel’s monopoly over the minds and hearts of consumers on both sides of the globe, the story gets hot. We have been led to believe that these sparkly stones serve as mandatory magico-religious talismans that augment, empower, and provide longevity to our love lives.
We are convinced that they are a sound investment. Diamonds equal emotional and financial success! This is all just a house of cards. A house built by one family’s clever manipulation of the world’s diamond supply alongside the deployment of a three-word slogan, “Diamonds Are Forever.” The advertising industry itself has officially recognized the slogan itself as a coup d’état of 20th century ad-campaigns.
For many centuries, diamonds were indeed a rare commodity. A total of a few pounds of gem diamonds a year before 1870 comprised the entire world production. The small amount of diamonds made their way exclusively to the treasure boxes of either the very rich or very royal. The highly prized stones were sifted out of a few riverbeds in India or ferreted out of the jungles of Brazil. This all changed in 1870 when enormous diamond mines, called “pipes,” were discovered on the land of two Boer farmers—the De Beers brothers—near the Orange River in South Africa. The De Beers brothers had no interest in diamonds, sold their land to British investors and vanished into the mists of history, leaving behind only their name to grace one of the most successful business ventures of all time. In the fever of this amazing discovery, diamonds by the ton were being excavated from the earth and began flooding the market. According to a three-part series on diamonds written by Edward Jay Epstein and published in the Atlantic, “The major British investors in the diamond mines realized that they had no alternative but to merge their interests into a single entity that would be powerful enough to control production and perpetuate the illusion of scarcity of diamonds.”
In 1888, De Beers Consolidated Mines, Ltd., was born. The legendary entrepreneur Cecil Rhodes was kingpin of the company until a young German-born diamond buyer, Ernest Oppenheimer, rose through the ranks to become chairman. Oppenheimer maneuvered De Beers’ monopoly control of the industry to include not only the mining but also the marketing of diamonds worldwide. De Beers is now a closely held Oppenheimer-family firm, and Ernest Oppenheimer’s brain-child developed many faces and arms over the decades: In London it operated under the innocuous name of the Diamond Trading Company. In Israel it was known as the Syndicate. In mainland Europe it was called the CSO, Central Selling Organization. In South Africa it morphed into the Diamond Development Corporation and Mining Services, Inc. The list goes on. Kevin Bonsor sums it up like this: “De Beers stockpiles diamonds mined from countries around the world and releases a limited number of diamonds for sale each year. De Beers produces half of the world’s diamond supply, and controls about two thirds of the entire world market. At times, just to keep prices up, De Beers has bought tremendous numbers of diamonds from countries attempting to inject large quantities into the market. If De Beers were a U.S.-based company, it would be in violation of antitrust laws for fixing the prices of diamonds.”
With the discovery of new diamond “pipes” in Siberia, Australia, and Canada, the De Beers cartel faces a serious crisis in controlling the disbursement and price of diamonds globally. Maybe even more significant is the recent breakthrough in creating nearly flawless man-made diamonds. But the Oppenheimers have a cast-iron gut. At one point in the past, an Oppenheimer had been prepared to dump tons of diamonds into the ocean in order to control prices. But why waste tons of diamonds on marine life when they could be dumped instead, for astounding profits, on the American public and later, the Japanese public? This is where the services of advertising agencies came into strategic play, first N. W. Ayer and, subsequently, one of the largest advertising agencies in the world, J. Walter Thompson. Stalin once claimed, “Writers are the engineers of the human soul.” Certainly the writers, creative directors, and visual artists of 20th century advertising fit the description pretty well.
In 2000, Advertising Age magazine honored the N. W. Ayer agency, for its work on the De Beers ad campaign, for having created the slogan of the century. How did the N. W. Ayer ad agency convince us that “Diamonds are Forever”? They used not only printmedia and the entertainment industry, but lectured in high-schools across the country and deployed even the Queen of England in their long, subtle and successful campaign to win our hearts and minds. We assume that diamonds have, traditionally and forever, been used as engagement rings. This was not the case until the N. W. Ayer decided to romanticize diamonds and, thus, astronomically increase the sale of their clients’ diamonds. After the end of WWI, in 1919, Americans weren’t buying diamonds.
Sales had declined by 50 percent and the quality of diamonds, measured in dollar value, had declined almost 100 percent. De Beers underwrote the extensive research necessary to develop and deploy the advertising and PR campaign that has made N. W. Ayer so famous and has changed the way the public views diamonds, well, forever. The agency’s goal was to mold “social attitudes of the public at large and thereby channel American spending towards larger and more expensive diamonds instead of competitive luxuries.” The research that N. W. Ayer and DeBeers did was aimed at making the connection in the public’s mind between diamonds and romance. Young men, who buy over 90 percent of engagement rings were an important part of this calculation. It is described that they had to really believe that diamonds were the gift of love: the larger and greater the diamond well, then, the larger and greater the love. The young women also had to expect diamonds as part of courtship.
The relatively new medium of motion pictures and the selling of diamonds made a perfect match. The agency devised a service called “Hollywood Personalities.” Once a week they fed the top 125 newspapers in the nation descriptions of the diamonds celebrities sported. Stories appearing in the press would fixate on the size of the diamond that a celebrity gave to their loved one, photographers would capture images of famous women wearing large diamonds and fashion designers would talk about trends in diamond-wearing. An N. W. Ayer memo states: “Since Great Britain has such an important interest in the diamond industry, the royal couple could be of tremendous assistance to this British industry by wearing diamonds rather than other jewels.” One is pressed to wonder if Queen Elizabeth, after accepting a diamond from Oppenheimer and making a well publicized trip to the diamond mines in South Africa, ever lay awake at night, gazing at her diamond, and weighing its allure against the de-humanizing conditions in which the miners, who excavate the “pipes,” live and work; or the murderous conflicts that have produced the term “blood diamond”?
N. W. Ayer used the images of the famous wearing diamonds to create a desire in the growing middle class. A 1948 Ayer strategy paper explains, “We spread the word of diamonds worn by stars of screen and stage, by wives and daughters of political leaders, by any woman who can make the grocer’s wife and the mechanic’s sweetheart say, ‘I wish I had what she has.’” In its 1951 strategy review, Ayer noted that “the millions of brides and brides-to-be are subjected to at least two important pressures that work against the diamond engagement ring. Among the more prosperous, there is the sophisticated urge to be different as a means of being smart... The lower-income groups would like to show more for the money than they can find in the diamond they can afford... It is essential that these pressures be met by the constant publicity to show that only the diamond is everywhere accepted and recognized as the symbol of betrothal.” N.W. Ayer applied its talent to eliminating this struggle. “We are dealing with a problem in mass psychology. We seek to ...strengthen the tradition of the diamond ring, to make it a psychological necessity capable of competing successfully at the retail level with utility goods and services.”
The 1947 strategy had Ayer sending guest lecturers to high-schools nationwide. N. W. Ayers explained to De Beers, “All of these lectures revolve around the diamond engagement ring, and are reaching thousands of girls in their assemblies, classes and informal meetings in our leading educational institutions.” So much for the masses. The wealthy clientele were addressed by “a series of lush four-color advertisements in magazines that were presumed to mold elite opinion, featuring reproductions of famous paintings by such artists as Picasso, Derain, Dali, and Dufy. The advertisements were intended to convey the idea that diamonds, like paintings, were unique works of art.” The talent, working for Ayer, considered themselves masters of their craft; they noted that the campaign had required “the conception of a new form of advertising which has been widely imitated ever since. There was no direct sale to be made. There was no brand name to be impressed on the public mind. There was simply an idea—the eternal emotional value surrounding the diamond.” They were dazzled by their own success and report that “a new type of art was devised...and a new color, diamond blue, was created and used in these campaigns.”
Maybe the most astonishing thing about diamonds is how deeply we, the public, have been led to believe that they are rare and, thus, valuable. Rarely have we been asked to doubt our perception of them as articles of worth to be held onto as valuable heirlooms. As many researchers have shown, and as described in Epstein’s Atlantic exposé, the myth that diamonds should be held onto as significant and valuable heirlooms was also created to serve a purpose. A typical diamond is nearly impossible to resell for its supposed retail value. The mark-up of a diamond’s price may range from 100 to 200 percent. Epstein explains that this is, in part, because diamonds are not rare. “It is conservatively estimated that the public holds more than 500 million carats of gem diamonds, which is more than fifty times the number of gem diamonds produced by the diamond cartel in any given year.” He continues to explain that, if ever a significant portion of these diamonds were to enter the world market, the price of diamonds could not be sustained. Therefore, those innocous diamond ad campaign’s—the emotional “Diamonds are Forever”—must be kept in order to continue the illusion of their “rarity.”
It is embarrassing, irritating, and even humbling to realize how easily
we have been seduced to passionately desire a shiny piece of carbon—one
of the most abundant elements on earth. The value of diamonds has been
a creation of artists, talented advertisers and one very aggressive company.
If the world market does indeed get flooded with man-made or non-DeBeers
diamonds, it might be more than just the jilted grooms and women who will
want to smash their diamonds.
1. You’ve been psychologically conditioned to want a diamond
The diamond engagement ring is a 63-year-old invention of N. W. Ayer advertising agency. The De Beers diamond cartel contracted N. W. Ayer to create a demand for what are, essentially, useless hunks of rock.
2. Diamonds are priced well above their value
The De Beers cartel has systematically held diamond prices at levels far greater than their abundance would generate under anything even remotely resembling perfect competition. All diamonds not already under its control are bought by the cartel, and then the De Beers cartel carefully managed world diamond supply in order to keep prices steadily high.
3. Diamonds have no resale or investment value
Any diamond that you buy or receive will indeed be yours forever: De Beers’ advertising deliberately brain-washed women not to sell; the steady price is a tool to prevent speculation in diamonds; and no dealer will buy a diamond from you. You can only sell it at a diamond purchasing center or a pawn shop where you will receive a tiny fraction of its original “value.”
4. Diamond miners are disproportionately exposed to HIV/AIDS
Many diamond mining camps enforce all-male, no-family rules. Men contract HIV/AIDS from camp sex-workers, while women married to miners have no access to employment, no income outside of their husbands and no bargaining power for negotiating safe sex, and thus are at extremely high risk of contracting HIV.
5. Open-pit diamond mines pose environmental threats
Diamond mines are open pits where salts, heavy minerals, organisms, oil, and chemicals from mining equipment freely leach into ground water, endangering people in nearby mining camps and villages, as well as downstream plants and animals.
6. Diamond mine-owners violate indigenous people’s rights
Diamond mines in Australia, Canada, India and many countries in Africa are situated on lands traditionally associated with indigenous peoples. Many of these communities have been displaced, while others remain, often at great cost to their health, livelihoods and traditional cultures.
7. Slave laborers cut and Polish diamonds
More than one-half of the world’s diamonds are processed in India where many of the cutters and polishers are bonded child laborers. Bonded children work to pay off the debts of their relatives, often unsuccessfully. When they reach adulthood their debt is passed on to their younger siblings or to their own children.
8. Conflict diamonds fund civil wars in Africa
There is no reliable way to insure that your diamond was not mined or stolen by government or rebel military forces in order to finance civil conflict. Conflict diamonds are traded either for guns or for cash to pay and feed soldiers.
9. Diamond wars are fought using child warriors
Many diamond producing governments and rebel forces use children as soldiers, laborers in military camps, and sex slaves. Child soldiers are given drugs to overcome their fear and reluctance to participate in atrocities.
10. Small arms trade is intimately related to diamond smuggling
Illicit diamonds inflame the clandestine trade of small arms. There are 500 billion small arms in the world today that are used to kill 500,000 people annually, the vast majority of whom are non-combatants.
Originally published by the Center for Popular Economics, 2/14/02. For more information visit the Econ-atrocity Archive at www.populareconomics.org.