Wk 2 Comparative Advantage

Comparative Advantage

ECOGM/561

September 29, 2011
David Flesh

Comparative Advantage of South African Countries

Marilyn Monroe was famous for the brilliant diamonds worn on her hand and around her neck as she sang “Diamonds are a girl’s best friend.”   Today’s society measures success by the size of the diamond engagement ring on a woman’s finger.   “Diamonds are forever” was DeBeers slogan for years and helped secure them as the world’s leading diamond retailer.   Diamonds are expensive but consumers are willing to pay for the luxury without knowing the conditions under which the diamonds are mined.   The following paragraphs will explore the background of where the diamonds originate from, the industry specialization of diamonds, and the industry types of protection from smugglers and terrorists.
      The text defines the theory of comparative advantage as “how nations maximize their material welfare by specializing in goods and services that have the lowest relative costs of production” (Gerber p. 38).   The comparative advantage of South African countries is the use of their natural resource of diamonds, mined by low paid laborers, and traded with companies or other countries at a high price.   The South African region contains the majority of the diamond mines in the world.
Background Information
In the countries of Sierra Leone, Angola, and Liberia diamonds are in abundance.   However, most of the rough diamonds are associated with civil war and terrorism.   The war lords use the diamonds to replenish their war chests with weapons and money (van Dijck, 2009).   The Hollywood movie “Blood Diamonds” made the public aware of the conflicts involved in the mining of the diamonds.
The process of “alluvial mining” also called “artisanal mining” in these countries are practicing modern slavery.   The alluvial mining is cash based which provides more opportunity for “smuggling, laundering, and secret meetings with terrorism financiers and arms dealers” (van... [continues]

Read full essay