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Free Market Solution to Blood Diamonds?

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Jamie Hoffman posted on Wed, Dec 22 2010 2:23 PM

Alright, this is my first post on here!  I mostly signed up to ask a few questions from time to time.  So here's my first question, what is a free market solution to blood diamonds?  I don't doubt that there is one, I'm just having a hard time figuring it out exactly.  Any help would be much appreciated, thank you!

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Define "Blood Diamonds."

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I am not sure if you are referring to some specific case or the general situation in Africa of warlords fighting over natural resources and quick immense wealth.

I will address the general problem, where diamonds actually isn't the largest concern. What they are interest in is highly valued natural resources that require very little labour and capital to extract. Cobalt and Congo being the prime example...

From what I have read the warlords there can make tens of millions of dollars per week on cobalt before they get chased out by someone else or the national army. In a poor and broken society this is naturally as we have seen a recepie for disaster and there is no market solution in the short-run.

However there states and ours are not helping the issue or enpowering the development of civil society that is necessary to get rid of this problem. Rather the opposite. There states breaks down any attemps at building trust by commerce in these societies and the IMF and our trade restrictions keeps messing up the opportunities for commerce which could build trust if they where there.

I think the main problem they have is a trust deficiency so you just can't do business with people. When no business is being done no wealth is being accumulated and without wealth no stable organisations interested in using these natural resources long-term and capable of defending them against criminals will arise. 

I also don't think you can build trust artifically in a society so all attempts at foreign aid are useless or even counter-productive. It need to build gradually from small seeds of commerce and it takes a very long time. In Europe merchants broke the cycle of violence by essentially buying liberty from the feudal Lords. They bribed them to a state where they eventually where self-regulating and self-taxing as long as they paid there flat tax fee when it was due. That removed the Lords insight into how much wealth they accumulated and arbitrary meddling in there business so up sprung a middle class of relativly free merchants who in there dealings with eachother had built trust.

An other advantage Europe had is that there wheren't a much richer market out there to sell your stuff to and bail. Wealth was simply measured by the amount of agricultural land you controlled because this allowed you to feed the army and expand political power which was the only commodity in the market really. So the incentives for war where somewhat lower.

In Africa it should be easier since we have plenty of responsible corporations that can just export what they are doing there. The many marxist regimes and warlords in Africa don't make any long-term investment there very lucrative as long as Asia and India are still as cheap to produce in as they are.

So now the corporations that do invest in Africa just do grab and run operations much like the warloads whenever they think there consumers won't notice. But hopefully there will me long term involvment from western business as the rest of the world get richer which will speed up the process of building trust.

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A Blood Diamond is usually defined as a diamond mined in a conflict zone in order to be sold for money or weapons to continue the conflict.  Many people blame private companies for keeping diamonds off the market in order to get an higher price.  Thus making it profitable for warlords to continue mining for diamonds.  I guess my question should really be are private companies and thus the free market really at fault here?

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Thank you hkarnoldson, this answers a lot of my question!

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vaduka replied on Wed, Dec 22 2010 4:23 PM

The one who is at fault is the same person who violated someones property rights. A company which has a total stock of X diamonds does not violate anyone's property rights if it offers on the market only X minus Y. 

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Jamie Hoffman wrote: A Blood Diamond is usually defined as a diamond mined in a conflict zone in order to be sold for money or weapons to continue the conflict.  Many people blame private companies for keeping diamonds off the market in order to get an higher price.  Thus making it profitable for warlords to continue mining for diamonds.  I guess my question should really be are private companies and thus the free market really at fault here?

Blame is another issue. From this perpective everyone who bought a cell phone would be at fault cause there is cobalt in all of them and it isn't found in many other places then warzones of Congo.

One could argue that we shouldn't buy stolen goods I and create incentives for crime I guess...

That would mean a complete boycott of like all the worst places on Earth though and it is not really productive for them or us. It would be better if we actually stopped boycotting the goods that free commerce has a chance to produce in these countries, and stopped doing shit like dumping millions worth of free cloths in a nation where the only thing that works is the textile industry...

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I guess my question should really be are private companies and thus the free market really at fault here?

In a true libertarian society, either the warlords would mine the diamonds themselves or they wouldn't be able to take the diamonds from those who actually mine it. The people who the warlords kill/hurt afterwards should try to mine diamonds for themselves before the warlords come into their villages (or whatever else they're called, i'm not really sure), and then sell them somehow to the military in exchange for weapons possibly? I'm not saying it's a fantastic idea to do business with the military, but if they can supply weapons to act as a deterrent, the locals will have more time to form a steadier, wealthier society. Hurting people for profit isn't capitalism. That's called government.

Welcome to the forums, by the way!

"Every normal man must be tempted at times to spit on his hands, hoist the black flag, and begin to slit throats." - H.L. Mencken.

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Bogart replied on Wed, Dec 22 2010 5:00 PM

First, people around the world are making better and better quality diamonds in factories.  Pretty much all industrial diamonds are produced in factories.  Eventually these diamonds will be superior in quality and lower in price to the cartel diamonds or these "Blood Diamonds" and this will be a mute issue.  Already manufacturers are flooding the markets with artifical rubies.  In the past 10 years rubies have become cheaper than garnets although in nature a garnet is much more common than a ruby.  It is that people are making artificial rubies.  The same will be true for diamonds.

As for blood diamonds, I am against people stealing from others.  So if the "War Lord" acquired the diamonds or the mine through mutually beneficial exchange then I am indifferent between buying from him and these Cartels.  Besides the cartels and other folks in the diamond business are not all that clean in how they have managed to acquire mines or diamonds either, and they are not all that nice with their profits.

At any rate the best solution is to allow all diamonds sellers to enter the market and let consumers choose the suppliers through profit and loss.  Then the War Lords will stop the war lording part to make more profits on the diamonds or the other suppliers will simply drive the prices so low that the war lords will get their money through some other means.

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Marko replied on Wed, Dec 22 2010 5:19 PM

It seems to me that every further individual that is digging for diamonds is one further individual not engaging in war. Surely the present situation is better than the alternative, where even the people who are now digging, walk around in camo and shoot rifles.

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Marko:
It seems to me that every further individual that is digging for diamonds is one further individual not engaging in war. Surely the present situation is better than the alternative, where even the people who are now digging, walk around in camo and shoot rifles.

The workers in much of these activities are basically slave labour so that is not the alternative. If there was no diamonds they would be subjected one constant tyrant much like North Korea probably cause in this age there would be little incentive to challange whoever first gains control just for the land and might alone. It is not much of an improvement, but probably better then living in a warzone.

Not much land anywhere has been orginally appropriated in a fair manner. Especially not natural resources since they have been claimed and distributed by government whim in even the most libertarian statebuilding projects.

The mines being stolen is not much a moral problem cause there is no claim from any original owner or any original owner to be identified. That no one that takes them can depend upon still being in control of the mine tomorrow is what causes the problems. 

The market solution is property rights .... but how that solution can implemented is very difficult. I don't know how but I know leaving it to commerce has the best shot of working judging from the track record of what western and local government has achieved...

 

 

According to one of the best books I have come across on the situation "Sweden's African War" (which i don't think has been translated) over 40% of foreign aid goes directly to military spending. And it is more since much of the non-budget part the aid (that goes directly to hospitals and such) is diverted to military use and it also frees up space in the budged for more military spending so the number is much higher then 40%. There are plenty of examples in the book of how all aid hospitals have been closed down and there equipment sold just as war breaks out. How trucks donated have been siezed and used in war and so forth it happens all the time and is well documented. There would probably have been a more stable balance of power without this infusion of foreign aid...

Escaping Leviathan - regardless of public opinion

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Marko replied on Tue, Jan 4 2011 10:25 AM

If there was no diamonds they would be subjected one constant tyrant much like North Korea probably cause in this age there would be little incentive to challange whoever first gains control just for the land and might alone.

In that case there should be no instability in African countries with no mineral resources (West Sahara, Ethiopia, Somalia...), while on the other hand in Russia or Saudi Arabia you should be seeing one coup after the other.

Wars don't happen because there are diamonds in the ground. They have better causes than that.

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Kaz replied on Tue, Jan 4 2011 12:14 PM

While there are, of course, diamonds whose sale was used to fund something bad, the "blood diamonds" issue in general is a scam.

It is used by the diamond monopolist-wannabes in South Africa, to make everyone afraid to buy diamonds from competing sources in Africa. They want to reclaim the glory days of their own evil.

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