Author: Marc W Herold
Working Paper Number: 21
PDF file: WP21.pdf
This paper traces the birth, maturity and decline of what was Bahia’s natural supply monopoly of black or industrial diamonds: first used in polishing materials (for consumption); then in drilling; and by 1940 they were employed in making parts for the Third Reich’s premier fighter plane, the Messerschmitt bF 109. The evolution in the way these stones were produced, the agents involved in production and distribution, and how the income was distributed along the commodity chain are examined. The importance of technological change is documented with the huge boost in demand for industrial diamonds when the Leschot diamond-head drill was invented (1863). The First World War cut off Bahia from traditional intermediaries and opened up a space for North American capital. A great surge in black diamond production in Bahia was led by the Bandler Corporation of New York, which introduced modern machine-based mining in the late 1920s; but the Great Depression doomed the venture. Between 1931 and 1941, keen secret competition arose to secure access to Bahia’s diamonds between the rising Axis and the Allied powers given the crucial role these stones played in making the modern weapons of war.
The first section analyses the emergence of Brazil’s natural monopoly in black diamonds. The second points out the crucial importance technological change (the Leschot diamond-head drill). The next section develops a unique analysis of how earnings were distributed along the black diamond commodity chain at the turn of the twentieth century. The final section underscores how the Great War created a vacuum into which North American capital plunged, such that by the late 1920s for the first time modern machinery was being used for the mass production of black diamonds in Brazil. While the Great Depression frustrated these efforts, the looming Axis and Allied contenders carried out secret schemes to secure Brazil’s black diamonds so central to the execution of modern war.