Economy

How the Engagement Ring Industry is Ripping You Off

September 4th 2015

By:
Thor Benson

Diamond engagement rings are a deep tradition in American culture. But is it because we like them or is it because we were told to like them?

As we've explained before, the engagement ring tradition only appeared in the past century. There were other symbols of engagement before this, including rings, but they didn't typically have diamonds. De Beers is the company that convinced us that engagement rings need diamonds. A campaign led by what was then called the De Beers Mining Company (and became known as the De Beers diamond cartel) ingrained diamond rings into marriage, and many of the other ideas they spread remain today.

It costs so much to buy a diamond because of market manipulation.

Author and industry expert Edward Jay Epstein explained in an interview with Power Line that diamonds were considered very rare well into the 1800s until prospectors in South Africa discovered a large crater in the city of Kimberley that contained a treasure trove of diamonds. This scared De Beers because this new, vast supply of diamonds would make them much more available, and thus, much less expensive. So, in order to prevent diamonds from decreasing in value, the De Beers cartel—a group of mining companies that banded together—decided to only release diamonds in smaller batches. They looked at how many Americans were expected to get married that year and limited the diamonds they produced based on that number. Because De Beers controlled 90 percent of the production of rough diamonds for much of the 20th century, this had a huge effect in limiting the overall supply of diamonds and driving up price.

 

Marketing has helped, too. The company's advertising campaigns have made the diamond engagement ring a symbol of marriage in America. Epstein told Freakonomics this year that De Beers has spent boatloads of money putting more diamonds in movies (every thief movie) and having people like Marilyn Monroe sing about diamonds ("Diamonds are a girl's best friend") to make people, especially women, want them.

 

"In America, in terms of households that possess them, [diamonds] are the second most common item," Epstein said. "The most common item is television sets." He said children are the third most common feature.

Diamonds are not really worth much. Just try to sell one.

"Diamonds are not an investment—they are a retail product like any other," Ira Weissman, a diamond expert, wrote for the Huffington Post in 2012.

This reality is apparent when people try to re-sell a diamond to a jeweler. The average consumer typically only gets around 20 to 40 percent of what they originally paid for the gemstone. The reason for the drop in value? It's because the diamond industry is tightly manipulated and marketed so diamond sellers can sell for high prices, but they know what it's really worth when you try to sell it back. The companies create an artificial demand by limiting the supply of new diamonds, and the lack of supply boosts prices when they sell it, but not necessarily when you sell it. All of this creates the appearance of a product that is hard to obtain and not owned by many, but it's a fabrication.

 

People were hurt to bring you your diamond.

Another reason that you might want to reconsider buying a diamond engagement ring is the "blood diamond" issue. Blood diamonds are diamonds mined in an area where a war is taking place, and the profits often fund terrible militant groups. The phenomena has been most common in Africa, and despite the fact that countries have tried to lessen the prevalence of blood diamonds, they are still a major problem. Many blame corrupt governments and investigative groups for not cracking down on the trend.