The Mutual Impacts Of Globalization And Diamond Industry

Diamonds are one of the world’s most valuable natural resources. Such unique stones are almost as old as the Earth itself, and have become culturally, socially, economically, politically and even scientifically significant. The diamond industry has always existed in a state of globalization. More than a thousand years ago, diamonds were mined in India, before being cut and polished in Arabia and sold to European aristocracy. These are stones that have been adored for their rarity and beauty, while being almost universally accepted as portable, untraceable and efficient stores of value. The diamond industry has begun since 1800’s, when an accidental find of diamonds in South Africa kicked off a mining, exploration and trading boom that led to the existence of one of the most successful and long-lasting cartels in economic history that would be the small network of world diamond producers, becoming a factor that contributes a lot in the globalization process.

On the other hand, Globalization has had, and is having, a considerably striking impact on the diamond industry, and the millennia-old distribution system that relied on multiple layers of personal exchange is showing cracks, or growth marks, depending on different aspects. This assignment would explore how globalization has affected the diamond industry’s distribution networks, and some extrapolation might inform how globalization affects not just legal certainty, but even a well-developed system of extra-legal certainty and some issues that diamond industry is dealing with then recommend several solutions to tackle such problems.

Globalization and Diamonds Industry Overview

Globalization

There are many authors in the academic world that study and try to define what globalization is, some of the approaches are more in terms of economy and others relate more to the sociological point of view. We may say that one complements the other; therefore, when there is an object of study like globalization, it is important to keep our minds open to debate different dimensions and perspectives about the subject. According to Campos and Canavazes (2007), in the framework of economy, the process of globalization is related to the capitalist system and to the neoliberal ideology. There is interdependence among countries, people and world organizations that interact in an economical, sociological and a political way, thus a local event in a specific country may have impacts in other parts of the world.

The KOF Index of Globalization measures three dimensions of globalization: The economic, sociological and political. “It can mean, among other things, the growing integration of markets and nation-states, receding geographical constraints on social and cultural arrangements, the increased dissemination of ideas and technologies, the threat to national sovereignty by trans-national actors; or the transformation of the economic, political and cultural foundations of societies. According to Dreher, Gaston and Martens (2008), to analyze and measure globalization, a series of things must be taken into consideration, for instance, the types of tax policies, government spending, economic growth, inequality, union power, and the natural environment.

Diamond industry

Until 1870, diamonds, a scarce resource which were found only in river beds in India and Brazil, whose elevated price was justified by the fact that only a few pounds of gemstones were produced each year. The discovery of the very first diamond mine near the Orange River in South Africa, however, resulted in a deluge of diamonds in the market, prompting the mine’s British investors to rapidly realize that their investment was in danger.

The intrinsic value of diamonds results from their outside physical properties, which make them suitable for industrial applications, though this value has been capped by the development of synthetic diamonds which can act as substitutes. In the absence of scarcity, natural diamonds could become no more than another semiprecious gemWhen compared to many other major industries like telecommunications, oil and gas, or consumer electronics, the diamond industry is relatively small. However, the diamond industry employs an estimated ten million people in the world, both directly and indirectly. It also inspires dazzling artistic creations, careful cutters and offers savvy investors a wealth preservation asset in times of financial turmoil. But some of the most fundamental benefits that the diamond industry creates are often the least well-known to the general public and the media because the diamond industry would be still a luxury one.

DIamond industry shapes the globalization

Discovering global transactional governance in the diamond industry first requires an exploration of the industry’s global architecture, which is illustrated by a diamond’s route from the mine to the jewelry manufacturer. The journey for most diamonds starts in African, Russian, Australian and Canadian mines, with approximately 65 percent of rough diamonds production being controlled by DeBeers, either through direct ownership or long-term exclusive buying contracts. DeBeers distributes rough stones by its Diamond Trading Company (or DTC- formally known as the Central Selling Organization or CSO) in London, and the DTC sells the stones in pre-sorted boxes, with take-it-or-leave-it price offers, to about 100 specific merchants known as ‘sight-holders’. The DTC’s centralized distribution system enables DeBeers to control the global supply and quality, and consequently diamond prices have remained remarkably stable compared to other commodities.