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Diamonds are a Rebel's Best Friend

By Ola Olsson
Goteborg University
The World Economy (2006)
Introduction

During the last decade, diamond production in African countries has been associated with rebel and terrorist funding, illegal smuggling and atrocious civil wars. This picture stands in stark contrast to the general image of diamonds in the Western world as being tokens of eternal love and symbols of extreme endurance and value. Although policy-makers in developed countries have become increasingly aware of the problem, the potentially destabilising effects of highly valuable minerals in some of the world’s poorest countries have so far not received the attention that they deserve. The purpose of this article is to analyse the linkages between the production of rough diamonds and economic development on a macro and micro level. In particular, I will try to explain why revenues from diamond mining have constituted a major impediment to social and economic progress in countries like Angola and Sierra Leone while they have been a cornerstone in the more successful development strategies of, for instance, Botswana and Namibia. I argue that two factors appear to have the greatest explanatory power in this regard; the strength of institutions of private property, as well as the nature of the extraction process. For reasons discussed further below, it is shown that so-called ‘alluvial’ mining is more strongly associated with negative externalities than ‘kimberlite’ mining. Furthermore, a single private player – the South African firm De Beers – has had a crucial impact on production and development in southern Africa.

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Read More: Economy, Environment, Ethics, Governance, Africa

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