Debeers Diamond Dilemma

Facts: It was until the mid-19th century that India and Brazil were the only producers that supplied the world with diamonds. Diamonds were so scarce that royalty found it extremely difficult to acquire them and the conception of making diamonds available to the public was unthinkable (Tsounta). In 1867 diamonds were discovered in South Africa and the diamond supply increased but this did not displace the ideology that diamonds are a precious and rare commodity that exists to this very day. Cecil Rhodes was a businessman that rented pumping equipment to diamond miners. Through his business he recognized the potential of the expanding diamond mining industry. He reinvested his profits in the acquisition of claims and by 1880 he had a large enough share of claims to form a separate company that focused on managing the diamond mines. This was the beginning of the DeBeers Consolidated Mines Limited in 1888 (Kretschmer). DeBeers then began to exploit the diamond mines in South Africa. While diamonds were a rare resource only a couple of centuries ago, the prices began to fall due to the discovery of the extremely rich mines in South Africa and other countries of Africa. DeBeers worked with other producers in a parallel effort, successfully set up a cartel to control international prices of diamonds (St. Antoninus Institute). DeBeers had control of 95 percent of the world's diamond production by 1890.

Ernest Oppenheimer and J.P. Morgan founded mining giant Anglo American PLC. They were DeBeers’s main competitor. Oppenheimer eventually gained control of the DeBeers Empire in 1927. He built and consolidated the DeBeers’s global monopoly in the diamond industry. Oppenheimer was linked to many controversies which included price fixing, antitrust behavior while stockpiling diamonds produced by other manufacturers to control prices by controlling the supply. He was also accused of not releasing industrial diamonds to the United States during World War II (Kretschmer)....