Three Questions concerning the Kimberley Process for all...

[denverappraiser]

Re: Three Questions concerning the Kimberley Process for all

I don't think my previous post is complete.

Kenny, it is not just diamonds that are targeted, but this is a gemstone discussion forum. Other issues that can be discussed is the offshore manufacturing that takes place in China and not in the USA. Apple is one culprit. The US wants cheap prices, but the cheap prices that they are paying for right now is an illusion. The future generations will pay for the current "profit above all else" attitude of American Corporations. The cracks in the system are already appearing.

But this issue, however important it may be, is not relevant to the discussion here, because the discussion board is about those shiny little stones that we all love so much.

What started my engine on this?

This online book.
http://www.edwardjayepstein.com/diamond/prologue.htm

‘Profit above all else’ is hardly new, and it’s hardly the mantra of corporations, American or otherwise and hasn’t been for decades. There is more pressure on companies to behave responsibly than there has EVER been. It’s coming from the government, from the consumers and from the employees. Yes, there continue to be abuses and they seem to get worse the farther you get from the ‘American’ company but I agree that they are players in the whole web and that it’s entirely fair to hold them responsible. Personally, I think the problem is CONSUMERS, both in the US and elsewhere, who demand goods and services at the lowest possible prices regardless of the source or the effects that production has on 3rd parties. This seems to be inherent to the human condition and although I see it as improving with better communication, I think we’re going to be dealing with this ‘til the end of time. As you point out, this is beyond the scope of a gemstone discussion forum.

 

[Apprepcen]

Re: Three Questions concerning the Kimberley Process for all

Perhaps this belongs in a different thread. You bring up a fair amount of things that are staples among the opponents of the diamond industry that have nothing whatever to do with Kimberly, the supposed topic. Nonetheless they are important and I’l try and answer a few while I wait here at the airport.
Diamond rarity. Diamonds are extremely rare, they are extremely difficult to mine, they are extremely difficult to process and they are distributed through a very costly distribution channel. This is not evil, it’s simply the facts. Worldwide production last year was roughly 33 tons of diamonds. That’s every mine in the world combined working for the entire year. Perhaps that sound like a lot and there are certainly materials that are a fair amount scarcer but that’s decidedly exotic stuff. That’s about 0.05cts per person. It’s a gross misrepresentation to describe the process of diamond mining as ‘gathering them up with payloaders’.

Costs. Cutting takes hours of labor per stone. Again, this is done in factories that are efficient and don’t always pay very well but the manufacturing costs are substantial. They are distributed through a network of wholesalers, laboratories, retailers, websites, etc. throughout the world and distribution accounts for well over 3/4 of the cost of diamonds. Mining is the first step, but it's not even the biggest component of the price of most diamonds at retail.

Demand. It’s certainly true that the ‘diamond invention’ of connecting diamonds to the engagement tradition was an enormously effective piece of marketing, but the implication that this is somehow evil or insidious is, at best, a narrow view of world economics and at worst a deliberate misrepresentation. Nearly everything we buy is unnecessary, nearly everything we produce is optional, and the symbolic nature of diamonds is an ENTIRELY valid reason to buy them. Why are the sellers of diamonds more effective at this than, say, the sellers of Bixbite, which is 1000 times more scarce, 1/10 of the price and really IS controlled by a single source? That’s a question for business schools to address while they think about why Nike seems to be better at selling shoes than their competition. Prices come from the competitive marketplace and demand by consumers. Period. That’s why IF’s cost more than VS1’s even though you can’t see the difference without tools. DeBeers didn’t invent this but they do seem to be well skilled at exploiting it. That boytjie from Africa was a clever fellow. I’m no big fan of DeBeers but on this one I have no complaint. They charge as much as the market will bear for their stuff. So do I. So do most other people. So do the miners of Bixbite. I suspect that so do you.

Does DeBeers have us all by the short hairs? I don’t think so but I can see how you would describe it that way. DeBeers does have competitors but those competitors are interested in selling their stuff for as much as possible too. They sell 100% of what they want to sell now so what would be the point of discounting? They would get the same volume of sales but less money. (note: Mining companies traditionally sell their entire output recently there have been some, notably DeBeers and Alrosa who have been holding back inventory in the hope of getting higher prices in the future. We’ll see how this plays out).

The threat that Kimberley was specifically created to address was a PR problem associated with human and environmental abuses in the producing countries. It was the direct result of consumer pressure and it was suggested, and entirely possible, that people would buy fewer diamonds unless something were done about it. Did it work? To some extent, yes it did. In addition, it HAS reduced some of the most egregious abuses, it HAS opened up a venue for sellers wishing to promote goods as ‘better’ because of how and where they were produced. It has also been a great boon to the tax collections in some very poor places like Sierra Leone at the expense of black marketeers and pirates. In some cases, like Zimbabwe, the government is little better than the pirates in terms of their behavior and it’s hard to tell if empowering them is really progress but, overall, I think Kimberley has clearly improved the lot of Africans, South Americans, Canadians and other producers of diamonds. It was created by a consortium of mining companies and governments of producer and consumer countries. DeBeers was and is certainly a major player but they were definitely not the only participant, nor are they the only beneficiary.

Sir this is a very enlightning post and I appreciate the time you took to write it. Thank you.