THE DIAMOND industry is massive. In the US alone it generates more than $11 billion in income a year. In Israel, it ranks as one of the country’s top export industries and has done so for a number of years. It also plays a large part in the economies of India (as polishers, not producers), the UK (where the stones are traded), Australia, Africa, and Russia. Diamonds are thus a worldwide phenomenon. And yet as far as trading, the business is owned by a handful of men who seem constantly worried about the market value of their unique product. Much of this worry is caused by their own machinations.
To understand this some background is necessary.
For some centuries diamonds were manufactured in the East, principally in India. Then, in the 18th century, India ran out of raw materials. Up to then, these precious jewels were the province of the very rich. Then in the middle of the 19th century, raw diamonds were discovered in southern Africa. Lots of them. In 1871, Cecil Rhodes (the English-born businessman and politician of South Africa) with the help of the Rothschild family, began the business with the De Beers family at the Kimberly Mines. In 1914, another business was started by Earnest Oppenheimer, a German Jew, who bought a rich area of alluvial diamonds (found at the surface of the earth). With partners from England and America, he founded the Anglo-American Corporation. In the 1920s, Oppenheimer felt strong enough to buy out De Beers. He threatened to flood the market with diamonds unless they agreed to make him Chairman of De Beers. They agreed and made him Chairman in 1929.
Though these are early years, this move set a pattern of what the industry would do from then on. Whenever there was a threat to the industry, De Beers (Oppenheimer kept the name) would make an offer to the would-be disturber, that was difficult to refuse. In fact, both sides in the negotiations could see that De Beers’ strategy would be beneficial to everyone concerned – since the market value of the product would be maintained. This is the constant goal at the center of the business and for one clear reason. The fact is that there are more than enough diamonds in the world to be enjoyed by everybody. Anywhere, in fact, where carbon is found is likely to produce the raw material at the base of the industry. What De Beers did was in fact to keep the price of diamonds high by consistently restricting the supply. Although it is easy to blame them, it is obvious that most of those involved worldwide in the discovery, manufacturing and selling of these stones agreed with their philosophy. Greed conquers all.
Nevertheless, this monopoly situation had meant that De Beers were and are, officially at least, not allowed to practice their trade in the US, where they are in contravention of the anti-trust laws. In 1945, the US Justice Department filed an anti-trust case against De Beers and its associates. This was not pursued for technical reasons. But in practice, of course, the move against them was more in the realm of fiction, since anyone who is anyone in the industry pays allegiance to De Beers’ central office in London. What goes on in the USA, is merely De Beers in other hands.
There is an irony in this since it was in the USA in the 1940s that De Beers launched the most successful PR campaign ever. Using the advertising agency of N.W. Ayer, they managed to persuade the American populous, with the help of some extremely clever advertising and corralling the moguls of Hollywood, to turn the gem diamond into a necessary appendage of marriage. “Diamonds are forever” – wrote the PR men, and thus they appeared on the fingers, necks and arms of many a Hollywood starlet. They even succeeded to persuade members of the English royal family to wear their diamonds. Diamonds were the ultimate symbol of true love. Diamonds were not only a girl’s best friend – to quote the famous lyric of Marilyn Monroe’s film score – they were also the best friend of an industry who created a ‘tradition,’ which today seems as natural as marriage itself.
There is however a dark shadow that falls across De Beer’s during World War II. Its complexities were discovered by Edward Epstein, an investigative journalist and former professor of political science at Harvard, UCLA and MIT. He discovered why De Beers’ cartel was barred from the USA and yet was never brought to court. However, his immediate brief was to discover how Hitler and his Nazi killing machine obtained industrial diamonds without which the manufacture of sophisticated weapons was impossible. Industrial diamonds are a type of diamonds used in the making of weapons that require hard cutting edges (these include airplane engines, torpedoes, tanks, artillery, and radar and electronics). They too, like gem diamonds, which are the type found in jewelry, were also the province of De Beers.
Epstein found that: According to a summary of OSS documents, the OSS (the forerunner of the CIA) learned through its agents in Germany that in November of 1943 Hitler had only an eight-month supply of industrial diamonds. When these diamonds ran out, Hitler’s war machine would be crippled. It would no longer be possible to build V-2 rockets or other exotic weaponry. It was thus a crucial wartime goal to prevent Hitler from replenishing his supply of diamonds.
Since all mines in South Africa were closed, the OSS reckoned that the only place from which the Germans could get industrial diamonds in sufficient quantity to maintain their military-industrial complex was the Belgian Congo. This, too, was part of De Beers’ empire, even though officially the British controlled these mines. In fact, when the Justice Department began to move against De Beers, the British War Department objected on the grounds that it might undercut the security system that De Beers had developed in the Belgian Congo. In an exchange of secret correspondence between the War and Justice Departments (which was declassified under Epstein’s Freedom of Information request), it was argued by an official responsible for maintaining the diamond blockade that “almost the entire [diamond] production of Africa is policed through the operation of elaborate controls extending through every mining area of the continent.”
The OSS had determined, however, that tons of diamonds were somehow reaching Nazi Germany. If the De Beers system of “elaborate controls” was as effective as the War Department held, how could such enormous quantities of diamonds be regularly reaching Germany? Finally, the OSS chief in Accra reported to Washington:
“We have now come to the conclusion (a) that our assistance was requested in this program so that the Diamond Trading Corporation might discover how much we actually knew of the ramifications of the De Beers world monopoly, and (b) that the OSS/Accra recommendations for a Security Committee were sabotaged, not by the British Government, but by the representatives of the Diamond Trading Corporation, Ltd., London, through their domination of the Diamond Committee of the Ministry of Economic Warfare.”
As the OSS pursued the investigation, it found that the diamonds were reaching the Axis powers through Tangier and Cairo. Its agents, posing as illegal buyers in these entrepots, found that industrial diamonds were being sold for $26 a carat, which was thirty times the official price. It became increasingly clear that enormous profits were being made on the millions of carats that were being smuggled into Germany... The shipment of several million carats of diamonds through the parcels that were regularly sent from the Congo to Nazi-occupied Belgium required considerable organization and support in the intervening areas.
After further investigations by the OSS, it again seemed that British interests had stifled the investigation. In February 1944, there was even a plan to have an “advisory commission” of British and American experts on diamond smuggling. But the British decided instead to have a diamond security expert and a mining engineer, both of whom were to be hand-picked by Sir Ernest Oppenheimer, (the head of De Beers) conduct a security study of the mine. Even though this self-serving plan was never actually implemented, the OSS concluded, “Thus the responsibility for security would have been turned over entirely to the industry.”
Somehow it was decided that British Intelligence would have the responsibility for preventing the flow of diamonds to the Nazis. The OSS report noted that although this British intelligence operation was initially “well-planned,” it was unable to cope with the Syndicate’s control of the industry and its dealing with the enemy.”
The suggestion that the De Beers-controlled syndicate was “dealing with the enemy” was not accepted, or at least not acted upon by the US War Department. Any investigation it was felt would be dependent on help from the British Government and it was considered unlikely that the British were prepared to investigate such a sensitive matter. The “sensitivity” seems to be an attempt to cover the diamond industry’s backside. The diamond industry was after all centered in England and it would be felt that it would be imprudent to “be involved in a controversy of this nature.” With the end of the war in 1945, the OSS was dissolved, and the question of “dealing with the enemy” was never resolved.
Epstein concludes this particular episode by noting rather forlornly that: “American servicemen returned from overseas and purchased diamond rings for engagements that they had deferred. To meet the new demand, De Beers reopened its mines in South Africa. The diamond invention had survived the war intact.”
Thus far the researches of Epstein. They are very revealing but perhaps don’t go the whole way. The implications of what he found are as astounding as they are gruesome. Corporate responsibility, conspicuous greed, blindly following the dictates of the market without looking at or even contemplating the results – all these claims could be laid at the closed doors of De Beers.
There are many elements in this story. How De Beers escaped prosecution for breaking the law in such a massive way is a question for the British government departments, as well as for the diamond industry itself to answer. What is of no less concern is the fact that these illicitly sold industrial diamonds allowed Hitler to continue his war by at least another year (or ten months if one wants to be exact). According to the OSS report, by June of 1944, the German fighting machine would have run out of the diamonds that were essential for their weapons of war. From then until the cessation of fighting, in May 1945, hundreds of thousands of lives were taken, not just in battles but also in concentration camps and other horrendous scenarios of the Holocaust. Almost all of the half a million Hungarian Jews met their fate during this period.
To this has to be added the thousands of Jews and others who were to be killed, tortured or starved to death as Hitler’s Nazis tried to complete the Final Solution before it was too late. According to Dr. David Silberglag of the Yad Vashem Museum in Jerusalem, between 7- and 800,000 Jews were murdered or died during this period. This is apart from the hundreds of thousands of non-Jews who died in the fighting.
The diamond industry – De Beers in short – was one of the elements in this awful equation. They weren’t the worst. The Nazis took the prize for that. But a case could be made for saying that they were the most venal. They saw an opportunity to make lots of money and they took it, heedless of the consequences, as destructive as they were. Did they not know what the consequences would be?
According to Edward Epstein (in private correspondence): “De Beers was not trying to prolong the war (just to sell to clients) as ever.” Which means that their covetousness was as malicious, misguided and immoral as the Nazis that, through their nefarious dealings, they were supporting. Maybe they thought that the laws of the market place were independent of, and higher than, the laws of justice. Whatever their motivation, the consequences are there for all to see.
Diamonds may be the diamond industry’s best friend, but the glitter hides a blood-stained history, for which the industry has yet to be made accountable.
