Scandinavian Working Papers in Economics

Working Papers in Economics,
University of Gothenburg, Department of Economics

No 156: Diamonds Are a Rebel’s Best Friend

Ola Olsson ()
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Ola Olsson: Department of Economics, School of Economics and Commercial Law, Göteborg University, Postal: Box 640, SE 405 30 GÖTEBORG

Abstract: Many countries that produce rough diamond have experienced a highly adverse pattern of economic development. In this article, we propose that the primary reason for the negative impact is that diamonds easily become the prize in predatory struggles between loot-seeking rebels and more or less kleptocratic governments. In weakly institutionalized countries like Angola, Democratic Republic of the Congo, and Sierra Leone, this theory works well, but it does not explain the impressive growth record of diamond-rich Botswana and Namibia. For a deeper understanding of these countries’ success, we point at the crucial differences between kimberlite and alluvial mining and the effect of having the world leading firm De Beers as a partner. Indeed, we argue that in countries like Angola, diamonds can never be a major vehicle for sustained growth, although the ongoing Kimberley process for eliminating conflict diamonds probably has contributed to making several African countries more stable.

Keywords: diamonds; rebels; social conflict; Kimberley process; alluvial mining; development

JEL-codes: L10; O13; Q32

22 pages, December 30, 2004

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