In the late 1930s, the world's largest diamond producer, De Beerslaunched an advertising campaign in the US linking the mineral to love and marriage. The company created new social norms, according to which a fiancé had to spend two months' salary on a gift "that would last forever". In 1939, 10% of brides received a diamond. Six decades later, that proportion had risen to 80%.
The campaign alluded to traditional, chivalrous romanticism, in which the man sacrificed himself and performed deeds to show his love and commitment to the woman. This materialised in the purchase of a diamond. The curious thing about this product is that its demand reverses the logic of supply and demand. Generally, if the price of the product is reduced, its demand increases and vice versa. In this case, it is the high cost of the precious stone that makes it desirable. In economic jargon, this is known as a "Veblen good".
Thorstein Veblen was an American at the end of the 19th century who first wrote about such products that seem to break all economic logic. In most cases, the exclusivity of these goods functions as a sign of the social and economic status of their user and encourages their demand.
Today, we have all kinds of commercial brands that comply with this principle; from Porsche, to Luis Vuitton. This has always been the case. A very clear example was the use of blue paints and dyes during the Middle Ages. Lapis lazuli, a semi-precious stone, was used to make them, which drove up their price. This, in turn, manifested the wealth of the people and institutions that used it, whether in clothing or in frescoes in palaces or churches, which increased its demand and drove prices even higher. This led to a fourfold increase in the price of gold. Until a substitute was found, of course. At that point, it ceased to show status and its value plummeted.
In recent decades, the production of synthetic diamonds has increased enormously. Today, one of these stones can be produced in two weeks and at a cost of 30% less, which will decrease over time. What's more, in 2018 the US trade commission expanded its definition of a diamond to include lab-created diamonds. All this is creating an earthquake in the industry.
In the past, diamond mining and trade has been linked to corruption, tyrannical states, violence and oppression. Lab-created diamonds, on the other hand, are free of this taint. Not for nothing has Tiffany & Co, the world's largest jewellery company, begun to report the origin of all its new diamonds of 18 carats or more. To counteract this, the mined diamond industry strives to generate the idea of the value of a natural mineral, created by nature millions of years ago.
To make matters worse, De Beers has lost the monopoly that allowed it to control supply and therefore prices.
The future of the trade in this material and whether it will manage to maintain its exclusivity is an enigma. In the meantime, and despite the risk to its image as a luxury item, the diamond is seeing its doors open to other uses and products. The usefulness of this mineral for industry is enormous due to its unique characteristics such as its hardness; and cheap production could create a market worth billions of euros. What could mean the decline of its traditional business is proving to be the key to starting a new market.