Burnishing the Rough. The Relocation of the Diamond Industry to Mandate Palestine

Summary

The birth of the Israeli diamond industry in the 1940s was a watershed event. While all the efforts to create a diamond cutting center during the first third of the 20th century failed, in the early stages of World War II it suddenly emerged and within a few years turned into a world-scale diamond production center. It was during the war and the period that followed immediately after that the entire edifice of the industry was shaped, making diamonds into one of the central exporting branches of the Palestinian and later Israeli economy and often affecting what had been going on in the diamond industry around the world. However, it changed more than the traditional Eurocentric map of diamond cutting and trading centers.

Capitalism – as a system of ideas and practices – had been advancing in Palestine since the end of the 19th century. It surged between the two world wars following accelerated industrialization, and it peaked during the Holocaust period. In this process, the foundations were laid for the strength of private capital in Palestinian and Israeli society, and the diamond industry had a crucial role to play in it. Its economic centrality, its tremendous profits, the immense income of hard currency it accrued to the sterling bloc, its managerial and business practices, its approaches to workers unions, its effects on urban society, and last but not least its international networking, even during the war, clearly placed the diamond industry at the center of Palestine's and the Yishuv's capitalist formation.

More significant perhaps was the association of this dramatic emergence with the state: the British colonial Mandate state and the embryonic state institutions in the Yishuv. The notion of state and state building was advancing in the region – as is well known – during the Ottoman period. But in Palestine it turned into a formative factor, mainly following the immense institutional and economic intervention of the British in Palestine and in the wake of the wide range of institutional activity in the Jewish sector during the Mandate. In the process in which Palestine became acquainted with state power and state building, the mutual and reciprocal relations between the state and private capital had a crucial role to play.