Blood diamonds: international policy options for conflict resolution

Purpose - The purpose of this paper is to examine the effects of four policy options for the international community to help resolve conflicts involving black diamonds: foreign aid, a tax arms exports, a tax on blood diamond and a tax on diamond exports in general from the war zones. Design/methodology/approach - A trade‐theoretic model of two open economies which are in conflict with each other was constructed. War efforts, which involve the use of soldiers and arms, are determined endogenously. The purpose of war is the capture of land containing a natural resource like diamond, but the costs are that lives are lost and production sacrificed. The capture of mining land helps to reinforce the war by using profits from the sale of the natural resource to purchase arms. Findings - The paper identifies the role of the “protective” nature of arms, and of income effects of the policy instruments, on the results. For example, foreign aid is found, unambiguously, to increase war when the entire profit from the sale of blood diamond is used to buy arms. But, when the proportion of profits from blood diamond used to buy arms is chosen optimally, foreign aid increases war efforts when arms are significantly protective of soldiers' lives. Social implications - This paper helps to understand conflicts, the resolutions of which have serious social implications for the conflict‐torn areas of the world. Originality/value - This paper provides the international community with an analysis of policy options for dealing with blood diamond. It shows, for example, that controlling supply of arms can be as effective as discouraging the consumption of blood diamond.