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THE RISE AND FALL OF DIAMONDS The Shattering of a Brilliant Illusion. By Edward Jay Epstein. 301 pp. New York: Simon & Schuster. $14.50. By PAUL ERDMAN

FIRST Bunker Hunt, then Ahmad Zaki Yamani, now Harry Oppenheimer: They are all finding out that the rich don’t necessarily always get richer. This threesome was betting on the money trees of silver, oil and diamonds respectively. In each case, the man involved thought he could keep the price of ”his” commodity rising by controlling the supply of that commodity available for purchase in the world market. All three have failed, to varying degrees, primarily for the same reason: They were defeated by their own success, or perhaps the word is avarice.

In a classic case of supply-side economics at work, the prices went high enough – to $45 an ounce for silver, $40 a barrel for oil and $60,000 a carat for the purest white (”D”) flawless diamonds – that new supplies of silver, oil and diamonds came out of the woodwork, because of increased output or dishoarding or both. The three men could have have sustained the supply cartels they controlled by using their cash reserves to buy in all of the new ”unscheduled” supply and thus keep it out of the market. Or they could have reduced their own output by amounts sufficient to compensate for the new supplies entering the market and thus restore the previous market equilibrium.

Since Bunker Hunt did not have a cartel that controlled the silvermining industry, he had no choice but to try to save his neck by buying all the silver that was on offer. He blew a couple of billion trying – and failed. Silver went back down from $45 to its current level of approximately $6 an ounce, and Bunker Hunt went back to Texas. Petroleum Minister Yamani knew that even Saudi Arabia did not have enough cash to sop up the oil glut, so he chose to reduce drastically the ”captive” output in Saudi Arabia proper, from 11 million barrels a day to 6.5 million. He essentially sacrificed half his nation’s income in an attempt to prevent a collapse in the world oil price. Though the plunge in oil prices has been stopped, it remains to be seen if his solution will be workable in the long run.

According to Edward Jay Epstein’s ”The Rise and Fall of Diamonds,” Harry Oppenheimer, the man who runs De Beers Consolidated Mines Ltd. is trying both approaches in a desperate effort to stave off the collapse of the worldwide diamond cartel. In August 1981, following Sheik Yamani’s example, Mr. Oppenheimer reduced the sale of diamonds from De Beers’ own mine output and stockpile by 95 percent, and now, he is spending billions a la Hunt in an attempt to reduce the number of diamonds in the open market.

So far these efforts have produced little success: The price of that benchmark one-carat D-flawless diamond has fallen from $60,000 to approximately $16,500 within just 18 months. (And Mr. Oppenheimer has recently resigned as chairman of Anglo American Corporation, the parent company of De Beers.)

What all this proves is that cartels, like diamonds, are not forever. This is the theme of Mr. Epstein’s truly fascinating book, which chronicles, as the subtitle indicates, ”the shattering of a brilliant illusion.”

The book begins with the author’s visit to South Af-

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