In his 1942 book Capitalism, Socialism and Democracy, the Austrian economist Joseph Schumpeter explained one of the most important characteristics of free market economies. He wrote:
It is the cheap cloth, the cheap cotton and rayon fabric, boots, motorcars and so on that are the typical achievements of capitalist production, and not as a rule improvements that would mean much to the rich man. Queen Elizabeth owned silk stockings. The capitalist achievement does not typically consist in providing more silk stockings for queens but in bringing them within the reach of factory girls.
Schumpeter’s anecdote about Queen Elizabeth and silk stockings illustrates capitalism’s remarkable ability to democratize consumption.
Initially, silk stockings symbolized privilege reserved only for royalty and elites. Yet capitalism’s true achievement, Schumpeter argued, is not merely supplying luxury to the rich but making such goods affordable for ordinary people. Entrepreneurial innovation, mass production, competition, and technological advances – driven by profit incentives – bring previously unattainable products within everyone’s reach.
This phenomenon elevates the living standards of the less fortunate by breaking down class barriers and spreading prosperity more broadly. Capitalism’s transformative force, according to Schumpeter, lies in continually converting luxuries into everyday essentials, thereby enhancing human well-being across social strata.
The diamond industry today exemplifies Schumpeter’s insight perfectly. Historically, diamonds represented wealth and exclusivity, accessible primarily to the affluent. However, technological advancements, particularly synthetic diamond production via High Pressure High Temperature (HPHT) methods and Chemical Vapor Deposition (CVD) technology, have dramatically changed this dynamic.
Chemical Vapor Deposition (CVD), for example, is a technique for creating synthetic diamonds by depositing carbon atoms from a carbon-rich gas onto a substrate. In this method, a diamond seed crystal is placed in a vacuum chamber filled with gases such as methane and hydrogen. When heated to very high temperatures, these gases break down, and carbon atoms accumulate layer-by-layer on the seed crystal, slowly forming a diamond. This process enables precise control over diamond purity, size, and quality, making it highly efficient and cost-effective compared to traditional diamond mining methods.
Not only have synthetic diamonds become more widely affordable, but they have also placed a downward pressure on natural diamond prices. As a recent article in The Guardian explained:
Natural diamonds cost 26% less in shops than two years ago, a drop during a time of high inflation that would be extraordinary were it not dwarfed by the poor fortune of their identical twins, lab-grown diamonds, which are now 74% cheaper than in 2020.
Furthermore, synthetic diamonds may appeal to modern consumers by offering ethical and environmental advantages over mined diamonds. Instead of sourcing diamonds from some of the world’s bloodiest conflict zones marked by human rights abuses and environments destroyed by primitive forms of mining, today’s diamonds increasingly come from the lab.
Much like silk stockings transitioned from royal exclusivity to widespread accessibility, diamonds today are undergoing a similar evolution. Synthetic diamonds eliminate historical barriers of price, scarcity, and exclusivity, transforming diamonds from symbols of privilege into everyday commodities.
* Marian L. Tupy is a senior fellow in the Cato Institute’s Center for Global Liberty and Prosperity and editor of HumanProgress.org.
Source: Human Progress
