Why Do Diamonds Cost So Much?

How does a polished pebble become one of the most expensive items on Earth? Two words: monopoly and propaganda.

Just two centuries ago, we didn’t think much about diamonds. Back then, they were truly rare and, as such, were mostly worn and owned by royalty. Then, in 1870, miners discovered huge deposits of diamonds in South Africa, and the previously tiny diamond market was soon flooded. Diamonds became not only common, but relatively cheap.

But those heady days were not to last. A man named Cecil Rhodes started buying up shares of the diamond mines. Just 18 years later, Rhodes controlled the entire South African supply of diamonds.

You may never have heard of Cecil Rhodes, but you’ve probably heard of the former owners of the farm where his diamond empire began—the De Beers. Over several decades of mercenary business practices, Rhodes turned his company into a cartel, and then a monopoly. Time and again, Rhodes and his De Beers mine took on and destroyed the competition, sitting on the world’s diamond interests like a dragon on a hoard. With the hand of De Beers on the spigot, the stratospheric rise in diamond production was fully stabilized.

Then the Depression hit, and diamonds and jewelry in general became a low priority for Americans. A 1939 survey found that a full third of brides at the time did without engagement rings altogether. De Beers was facing huge supply and negligible demand. A new era of mercenary tactics was in order.

The company sent a memo to advertising agency N. W. Ayer, asking if “propaganda in various forms”—that’s an exact quote—might boost diamond sales. The agency surveyed consumers and found that most considered diamonds a ludicrous luxury. They realized that the way in to people’s wallets was through their hearts, and they launched arguably the most successful advertising campaign in American history.

De Beers began lending large diamonds to celebrities and socialites. To ensure that the stones would be mentioned in the press, they started their own newspaper and magazine columns, talking up the product and describing it in glowing detail.

In 1948, copywriter Frances Gerety struck gold with four little words: “A Diamond Is Forever.” The phrase positioned diamonds as both a metaphor for eternal love, as well as a sound investment (which they’re really, really not). Sales of diamond engagement rings began to climb. The Ayer ad agency’s annual report for 1951 noted that “Jewelers now tell us ‘a girl is not engaged unless she has a diamond engagement ring.’” By 1968, 80 percent of American brides were wearing them.

Americans were buying diamonds, but, in the eyes of De Beers, they could be buying—and paying—more. And so the propaganda continued. Ayer hit another home run in the 1980s with ads that asked, “Isn’t two months’ salary a small price to pay for something that lasts forever?”

Like the “tradition” of diamond engagement rings, the concept of a man spending two or three months’ salary on a diamond comes straight from the people selling it. The famous “Four Cs” (cut, clarity, color, and carat) were popularized as yet another marketing ploy, developed to offload smaller diamonds (De Beers ads from this time conveniently forget to mention carat).

According to a 1982 Atlantic piece, there was usually a 100 to 200 percent retail markup on diamonds at the time, and the prices continued to stay high so as not to disrupt the market. De Beers relinquished its monopoly on the diamond market in 2000, but the price of diamonds remains inflated due to suppliers stockpiling the gemstone. Between consumer manipulation and the human rights offenses related to conflict diamonds, it might be time to rethink our love affair with these sparkly pebbles.