Summary
De Vries’s account of the reciprocal pact between the state and the diamond industry: formed under the British Mandate in 1940, when the colonial state enabled, regimented and limited the industry in return for dollar exports and economic-warfare control, and reproduced in spring 1948 by the state of Israel, which inspected but also developed the industry as its chief source of hard currency (Diamonds and War — State, Capital, and Labor in British-Ruled Palestine, PDF p.253, p.258, p.263).
Details
- De Vries describes the Mandate diamond industry as a state-capitalist sector, the state and capital living off one another in mutually dependent relations, and the state of Israel, with its “managed economy” for financing the 1948 war and absorbing immigrants, as a direct continuity of that reciprocity (Diamonds and War — State, Capital, and Labor in British-Ruled Palestine, PDF p.253).
- The new pact emerged in spring 1948 between the state, the industry and the workers, its rapprochement already in the making in the Jewish Agency’s intervention to resolve the 1946-1947 crisis — its half-million-dollar allocation and loan guarantees of early 1947, by which it served as a surrogate for the withdrawing British (Diamonds and War — State, Capital, and Labor in British-Ruled Palestine, PDF p.246-247, p.258).
- It was institutionalized through the Department of Diamond Control (April-May 1948) and the Ministry of Trade and Industry under Peretz Bernstein, with Albert Ehrenfeld and Jacob van Amerongen handling the transfer of diamond control from the British to the new sovereign (Diamonds and War — State, Capital, and Labor in British-Ruled Palestine, PDF p.259).
- Economically, the state licensed importers and exporters, allocated credit and foreign currency, inspected factories, required hard-currency returns to the Treasury from diamond exports, exempted diamond workers from military service in return for obligatory confinement to the workplace, bought the manufacturers’ unsold diamonds in 1949, and handled the arrangements from 1950 through Chevrat Pituach (Diamonds and War — State, Capital, and Labor in British-Ruled Palestine, PDF p.263-265).
- The manufacturers held together in the pact not just by occupational commonality but by the state, its backing of the industry and the state-building project; the workers were its weakest actor, factory fragmentation and home work having splintered their solidarity and weakened their strike propensity, and organized labor’s voice became a shadow of its wartime presence (Diamonds and War — State, Capital, and Labor in British-Ruled Palestine, PDF p.261-263).
- The difference from the British pact, in De Vries’s reading, is that British colonial rule asked to expand the industry and at the same time to limit its expansion, whereas Israel, seeking in the early 1950s to recruit private capital to the national cause, undid that structural contrast by linking its support for the industry’s expansion to state building and social formation (Diamonds and War — State, Capital, and Labor in British-Ruled Palestine, PDF p.263).
- The Epilogue reads the pact’s pillars as national: the industry as a major ingredient of the new state’s economic nationalism and immigrant-absorptive economy, its later joining of the state-planned development towns, and the completion of the national legitimization of private capital, whose reciprocal relations with the state enabled private capital to become a powerful force in Israeli society and harbingered the decline of organized labor (Diamonds and War — State, Capital, and Labor in British-Ruled Palestine, PDF p.267-268, p.273).