366
SIR ERNEST OPPENHEIMER
the association if the stocks of the purchasing organization exceeded certain stated figures.
♦ XXI ♦
Taking
them all in all the post-war years of the diamond industry were
prosperous years. It has already been related in a previous chapter how
the uprush of demand and the rise of prices continued to enable the
Diamond Corporation to dispose of its stocks, to realize, therefore, a
very large 'windfall' profit and to utilize these gains, not only in
building up a stabilization fund of f 20,000,000 for the future
protection of the diamond industry, but in the financing of the new
Orange Free State gold-fields and in the advancement of South African
industry in other directions as well.37
Nevertheless,
against this generally prosperous background, some serious difficulties
had to be faced. It is the case that the increased use of industrial
diamonds had added a second string to the bow, but it is also the case
that the factor which reacts unfavourably on the gem trade—i.e. trade
recession—is also a factor reacting unfavourably on the demand for
industrial diamonds; recession implies both a fall in world
productivity, which involves a declining demand for industrials, and a
fall in world income, in terms of money, which involves a decline in
the consumption of gem stones. Trade recession is a general factor,
but, in these post-war years there were special factors influencing
each division of the trade, favourably or unfavourably, as the case may
be: 'stock-piling' or the cessation of 'stock-piling' (particularly in
the United States) in the case of industrials; inflation and currency
disorganization, in the case of gem stones, which had the net effect of
encouraging hoarding or investment in gem stones as an 'inflationary
hedge'.38 Apart from this, in the post-war period, exchange controls and currency disorganization were to have some very serious conse-
37 Supra, chap. II, sec. X, p. 105.
38 Speaking
to the shareholders of De Beers on 5 June 1951, Ernest Oppenheimer
said: 'I should like to sound a note of caution. We are living in
uncertain times and our business is particularly sensitive to world
events. As you know, our policy aims at the permanent welfare of the
industry and we refuse to be led astray by boom conditions, but follow
a conservative price policy. The result is that diamonds are nowadays
considered a good hedge against currency depreciation and some hoarding
of diamonds takes place, thus augmenting for the time being the volume
of gem sales.
'Then
again our industrial sales include considerable purchases by the
American authorities for stock-piling purposes. With the return of more
normal times, stock-piling will cease, and the hoarded gem diamonds may
be resold.'
