Peace is Bad For Business. See: Angolan Diamond Industry

Strange that a strong central system, even if it is run by warlords, may sprout the flowers of economic prosperity. Such was the case in Angola, a former Portuguese colony left in shambles when the Europeans left in 1975. Rebel commander Jonas Savimbi made good use of the chaos, armed himself and ran the country's diamond exporting industry, raking in good money from what are commonly known as blood diamonds.

Ray Fisman in Slate chronicles a case study of Savimbi's downfall, and how investors yanked capital as soon as he was killed in combat. Fisman writes:

Most people, including nearly all of my first-year MBA students, think that the key to business success is cheaply and efficiently producing something people want to buy. If this were the case, then war's end should have made Angolan miners and their shareholders richer as production costs plummeted. But the effect of peace on diamond mining in Angola shows that more important than producing something well is doing it better than the competition—and the potential competition.

The Inquirer has reported extensively on the Dirty Diamond Industry, so to go further, how emblematic is Fisman's example of the security situation in Angola of other industries thriving off of conflict?

Diamonds Are Pretty. You Know The Rest

In light of the film Blood Diamond — which chronicles the horrors of the diamond industry in 1990s Sierra Leone — noted diamond journalist Tom Zoellner wrote in November for Time magazine, "So, Should You Buy a Diamond?" The article, explains how the Kimberley Process was instituted eight years ago to ensure diamonds from countries at war were mined ethically. But he goes to state that the Kimberley Process doesn't apply to countries that are not "at war," even if, like Angola, a war-like society has developed during peacetime. --BJ

Previous coverage: Interview with Tom Zoellner
Previous coverage: The rest of The Inquirer's Dirty Diamond Week

Part V: "Since Time Immemorial"

Read about The Inquirer's investigation.

by Andrew Bast

“The diamond industry has operated like this from time immemorial,” says Dr. Joseph King, a professor of Terrorism and Organized Crime at John Jay Criminal College. “When you look at 47th Street, it’s a whole system for black market operations. Illegitimate diamonds is part of the business and it’s not going away.”

Part III: The Intricate Workings of a Jewelry Fence

by Andrew Bast

The story of Kim’s Jewelry, and the bust there last year, exemplifies what the FBI called, “a major fence.” Nam Pyo Kim was born in Korea and immigrated to Los Angeles. After a failed shot at jewelry there, he spent a few years in Florida before finally moving to New York where he set up a jewelry shop, married and fathered two children. He crafted and designed Korean-style jewelry, and in turn succeeded by fulfilling a particular niche in the 47th Street Diamond District.

Part IV: The Diamond District Turns Deadly

Read about The Inquirer's investigation.

by Andrew Bast

Fencing in Manhattan's Diamond District has turned deadly. Late on a June afternoon in 2003, teams of federal agents and detectives shut down 47th Street to traffic and arrested 11 jewelry merchants in the Diamond District, including Roman Nektalov, who owned a 30-year-old mainstay on the block, Roman Jewelers, and his son, Eduard. The two, along with nine others, were laundering immense amounts of Colombian drug money.

Part I: A Laundromat for Stolen Jewelry

Below is the first of five installments of The Inquirer's exclusive investigation into the largest Diamond District in the United States: 47th Street in Manhattan. In the face of a challenged industry, the utterly unique city block is changing rapidly, and the results of our legwork show that not everything emerging is glittering, glamorous or good.

by Andrew Bast

On a cold February day in 2004, Freddy Castro Garzon and Claudia Guerro walked up 47th Street, the heart of New York City’s Diamond District. Windowed storefronts, glistening with gold, silver and precious stones, line the block. Some are dark, empty and dusty. And a few glare green and blue with neon signs that read, “We Buy We Buy.”

Castro and Guerro climbed the stairs to Kim’s Jewelry. At a metal gate, they rang the buzzer. To the left, the store seemed barren with a single glass display case. Hurriedly, Nam Pyo Kim ushered them inside, unlocked an inconspicuous coffee-colored wooden door and the three disappeared into a small room.

Part II: Disappearing Business

Read about The Inquirer's investigation.

by Andrew Bast

The diamond industry already bears a horrible scar from its by its tendency to look the other way. For years what are known as blood diamonds flooded the world’s markets. Essentially, traders bought rough stones in Africa from warlords in Angola, Sierra Leone and the Democratic Republic of the Congo and in turn funded the horrific insurgencies against the countries’ respective governments. In 2000, the United Nations General Assembly unanimously adopted a resolution banning “conflict diamonds,” and the BBC quipped, “Diamonds are a warlord’s best friend.”

DIRTY DIAMOND INDUSTRY: A Final Image . . .

All week we've parsed the diamond industry. As the investigations draw to a close, there's a single image that struck some of the editors, a truly imposing photo by Sarah Spencer who snapped it while visiting a diamond mine in Sierra Leone. As an epilogue, The Inquirer presents . . .

DIRTY DIAMOND INDUSTRY: Tyra's $10 Million Support System

$10 million in diamonds to hold up your chest? Click to watch and be blessed by Tyra's brilliant insights as to "the big bling bling one."

That's the big money maker. Make sure the shot has that.

Stop. This must stop.

DIRTY DIAMOND INDUSTRY: Interview With Author Tom Zoellner

The Inquirer caught up with Tom Zoellner in Albuquerque, where Zoellner's on a tour to promote his new book, "The Heartless Stone: a journey through the world of diamonds, deceit, and desire." It's a rapid-paced yarn, a kind of adventure travel tale (Zoellner crisscrossed the globe from Siberia to Angola investigating diamonds) that's chock-full of fascinating details from the mines in Sierra Leone to the heartbreak that can accompany a man with in possession of a rejected engagement ring. Highly recommended.

New York Inquirer: Diamonds are so pretty! What could ever be wrong with them?

Tom Zoellner: Granted, they are kind of attractive, but so are lots of rocks. What's uniquely ugly about diamonds is the way they've been used for such disgusting purposes throughout history. They've been used to launder money, finance civil wars and keep laborers in a kind of bondage that is slavery in all but name.

NYI: Whoever decided that diamonds were so important (so desirable, so expensive) in the first place?

TZ: The idea of a diamond as an object to be valued and coveted (and killed for and died for) was born in the Golconda region of India in the 6th century B.C. It was introduced to Europe in the 17th century by a traveling French merchant named Jean-Baptiste Tavenier. These rocks took off like a fad among the nobles. The mystique was born. Everyone wants to be like royalty and a diamond is a quick -- and false -- ticket to where we think we want to go.

NYI: You write that the diamond trade “brings misery to millions of people across the world.” Misery? Millions? So Blood Diamonds are no joke?

TZ: Far from a joke. Some of the worst African wars of the last twenty years were partly or mostly financed by illicit diamond sales. And these are the same stones that most likely make their way to America and wind up on the fourth finger of an unwitting bride.

NYI: In “The Heartless Stone,” you call De Beers “The Cartel.” That's unforgiving.

TZ: Not at all. De Beers survived for 118 years by exercising virtual monopoly control of the world's supply of diamonds. That was their hallmark and their guiding philosophy.

NYI: Oil, livestock, sugar, these commodities are traded in international market exchanges, allowing the supply and demand forces of the market determine value and cost. Is it the same for diamonds? What, or who, determines their value?

TZ: Diamond exist outside of the traditional fluctuations of a market economy. The question is not “what” determines the price of diamonds, but “who.” That entity is De Beers. They keep a careful guardianship over the price by releasing a calculated amount of stones onto the market from their London selling office every fifth Monday. Their dominance is not quite what it used to be these days, but they still have control of slightly half of the world's supply of rough diamonds.

NYI: Your book is like an investigative adventure tale. Meeting warlords in central Africa, did anyone stick a gun in your face and say, “Get your hands off my rocks!”

TZ: Hah! Never heard that one. The research went pretty smoothly, for the most part, and people generally treated me with courtesy, even in the midst of some sketchy areas. Although there are some terribly brutal things that happen within the supply chain, the industry has an old-boy genteel air about it.

NYI: Look, let's cut to the chase. Do people buy diamonds because they don't have anything better to spend their money on?

TZ: There's a saying in the business: “If diamonds did not exist, we would have to invent them.” There's something in the human heart that yearns to possess a little piece of natural brilliance. Something that claims to be eternal. Something that sets us apart from the banality of everyday life and lifts us to a higher realm of power, prestige and perfection. Nobody understands this better than De Beers, which has managed to insert an otherwise worthless rock into the crosshairs of this grand mysterious urge that exists inside all of us. This is the genius behind the greatest ad slogan ever written.

It's just four words long. Say it after me, everyone . . .