De Beers and Monopolies


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In my family normal discussions revolve around weird topics like monopolies around the world. One of the monopolies we came across was the De Beers monopoly on diamonds. What I don't understand is how the monopoly could exist for so long. Monopolies don't exist without government intervention and I couldn't find much on any government favors De Beers was or is receiving.

Thanks,

David C.

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As luck would have it...

A single company – De Beers – controls a significant proportion of the trade in diamonds. They are based in Johannnesburg, South Africa and London, England. One contributory factor is the geological nature of diamond deposits: several large primary kimberlite-pipe mines each account for significant portions of market share (such as the Jwaneng mine in Botswana, which is a single large pit operated by De Beers that can produce between 12,500,000 carats (2,500 kg) to 15,000,000 carats (3,000 kg) of diamonds per year, whereas secondary alluvial diamond deposits tend to be fragmented amongst many different operators because they can be dispersed over many hundreds of square kilometers (e.g., alluvial deposits in Brazil). -- http://en.wikipedia.org/wiki/Diamond

I meant that literally: De Beers was lucky, nothing more or less.

Long ago, in a private discussion, Linda Tannehill pointed out that the De Beers monopoly is a perfect example of how a truly natural, truly market monopoly does operate well and good. They could charge "whatever they want" and people would buy less or fewer. They charge what they can based on the fact that ultimately, consumers, not producers drive prices.

The Wikipedia article is pretty dense. I enjoyed it. Gem-quality diamonds are a pure luxury. Industrial diamonds from nature represent 80% of the total natural inventory, but that is only one-fourth of the synthetic industrial production. In some ways, that reflects the markets also for gold. Libertarians are monomaniacal about gold as money, but most of the gold in the world is used for jewelry; and industrial uses rival monetary markets for order of magnitude.

If you want a real monopoly, you need help from a government.

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