The Ego/Self-System Part III: The Psychological System

Article by Robert F. Steele, MA

The Self/Ego System Part III: The Psychological System


I regard this element in the ego series as the core of the discussion. This part is where the ego is delineated and its dynamics are explored. Sources will be provided, but some of the material is original to the author. I was a practicing addiction counselor and hold the required academic qualifications, and, as such, feel my observations are of value and worthy of consideration. In addition, I may be in a rather unique position in that I have been a dedicated student of Krishnamurti for close to fifty years. However, let me make it absolutely clear that I am only offering food for thought and consideration concerning Krishnamurti’s teachings. Many quotes from him will be presented in this article but only to give the reader a chance to compare positions and decide for themselves whether this material is of relevance or is helpful in understanding those teachings. Krishnamurti did not speak about the details of the ego’s operations, but he did clearly and continuously identify it as the deep source of humanity’s inability to make peace with itself and to end its divisions and the history of violence issuing from those divisions. It is in this sense then that I hope to illuminate the workings of the self/ego system. It may help others to more clearly and quickly identify this psychological mechanism within themselves, such that the light needed for the journey into the pathless land shines a bit more brightly.

The Self/Ego System Part III: The Psychological System

A Social Implant


The sense of self/ego begins at birth with the first caregiver’s interactions with the infant. The first reactions the infant has are simple emotional reactions. However, the elaboration of these reactions quickly begins. The first smile and an increasing emotional variety of reactions develop. This is because the parts of the brain responsible for emotional responses is much more developed at birth than cognitive functions are, which take about two decades to reach full capacity (Opper & Ginsburg, 1987). This means that our earliest representations of self, derived from interactions, are captured in emotional reactions that are not accessible to verbal interpretation. Later, as cognition develops, connections form between the neocortex (thinking) and the limbic (emotive) systems that can operate both ways simultaneously, making thought and feeling forever linked (Damasio, 2010). This places those early emotional representations deep within the subconscious. Keep in mind that material in the subconscious is not hibernating and inactive. It is very active and not constrained by conscious controls, and we all have it. It can only be concluded that much of who we think and feel we are resides and issues from the subconscious.


Consciousness is like a deep, wide, swift-flowing river. On the surface many things are happening and there are many reflections; but that is obviously not the whole river. The river is a total thing, it includes what is below as well as what is above. It is the same with consciousness; but very few of us know what is taking place below. Most of us are satisfied if we can live fairly well, with some security and a little happiness on the surface. As long as we have a little food and shelter, a little puja, little gods and little joys, our playing around on the surface is good enough for us. Because we are so easily satisfied, we never inquire into the depths; and perhaps the depths are stronger, more powerful, more urgent in their demands than what is happening on top. So there is a contradiction between what is transpiring on the surface, and what is going on below. Most of us are aware of this contradiction only when there is a crisis, because the surface mind has so completely adjusted itself to the environment.

– Krishnamurti


The infant then is absorbing impressions of his or her surroundings and starts to form emotional concepts of those surroundings, both physical and social. Those impressions are also giving the infant and child material with which to build a sense of self upon (Damasio, 2010) (Winnicott, 1965). Describing emotions as concepts may seem peculiar, but is intentional and very important because the limbic system, like the cognitive system in the neocortex, is a system of perception, of identifying the elements of our world and initiating responses. Emotional concepts are retained as representations just as thoughts are, but instead of telling us what we think about the world, they tell us what it “feels” like. The limbic system is a learning system that has functioned well in vertebrate creatures for hundreds of millions of years before the gradual evolution of cognition. Also, since the limbic system sits just atop the brain stem, which operates basic bodily functions, the limbic system has great control over the body via glandular secretions. What feels good or bad, what feels friendly or hostile sends immediate messages to prepare the body for meeting challenges, threats or rewards. Being an early system does not mean primitive. The human limbic system has evolved along with the emergence of cognitive functions to become a highly sensitive and subtle system capable of participating in the creation of our highest art and philosophical systems. Without it, nothing happens. It is the motivator (Narvaez & Schore, 2014). Remove the “e” in “emotion” and you get the word “motion.” In realizing that we have two distinct but connected perception systems, it is important to understand certain distinct differences between them. A good analogy is to see cognition as digital. Consider a green chair. Green, yes or no. Chair, yes or no, and so forth. Cognition has only one level of volume. The emotion system is analog. How much do you like or dislike the green chair? How much fear do you experience when in frightening situations? A little can be enjoyed: a roller coaster ride. A lot is called terror. Thus, the emotional voice can be very soft, barely audible, or so intense as to totally override cognition. This is by design, as emotional response can get us moving far more quickly than lumbering cognition. I think understanding this is important for understanding ego, because ego, as we have seen, is based on fear. And fear, even as a memory, is painful.


I want to find out whether fear can end – fear of death, fear of survival, fear of physical pain, fear of not being able to talk in public, fear of losing my wife, my children, job. It is part of my life, it is not a joke with me. It is something dreadfully serious because when there is fear there is darkness, an absolute sense of non-action, a kind of paralysis takes place. And if you like to live in a paralysis that is your affair, and play with words and try to be clever, that’s your affair, but if you are a very serious man the question of fear is tremendous; and seriously ask whether it is possible to end it at all. Therefore you investigate it, say, what is fear, how does it come? I see how it obviously comes in a very simple form – the past, through the present to the future. And that is the movement of thought…

Now I am suggesting that you look at this fact: that thought as movement in time may be the real cause of fear, all fears, not just one fear. Is that the truth?

– Krishnamurti


The earliest impressions stay with us and they are concerned with security, such as proof in the form of parental love and the offering of constant attention and care. If not met, the infant does not thrive. His or her world is dominated by anxiety, a form of fear, and a developmental stage is missed, creating a lifelong psychological deficiency. But if thriving, the rocketing development of the brain continues and self-consciousness begins to quickly develop with a secure foundation. A feedback loop begins to form where the brain can reflect upon sensory input as well as the forming representations that begin to inhabit consciousness. This sets the stage for the formation of self/ego. You may remember from Part II of the series that consciousness requires a center, but with interactions, the developing human brain begins to add to the center. It adds attributes and descriptions, and the center is no longer just for mapping; it now forms a sense of self at the center.


We are trying to find out what this thing is which we call the self, the center of the “me”, from which all activity seems to spring; for if there is no transformation there, mere change on the periphery, on the outside, on the surface, has very little meaning. So, I want to find out what this center is, and whether it is possible to really break it up, transform it, tear it away. What is the self with most of us? It is a center of desire manifesting itself through various forms of continuity, is it not? It is the desire to have more, to perpetuate experience, to be enriched through acquisition, through memories, through sensations, through symbols, through names, through words. If you look very closely, there is no such thing as a permanent “me” except as memory, the memory of what I have been, of what I am and what I should be; it is the desire for more, the desire for greater knowledge, greater experience, the desire for a continued identity, identity with the body, with the house, with the land, with ideas, with persons. This process goes on, not only at the conscious level, but also in the deeper, unconscious layers of the mind, and so the self, the center of the “me” is sustained and nourished through time.

– Krishnamurti


Everything that happens to us becomes material for a self-system. The child is fully capable of interpreting subtle social signals. Expressions, body language, what is said or not said and tones of voice all give the child clues about him or herself. And, being relatively helpless, the child, like the infant, continues to deeply need and crave security, except now with some self-awareness he or she can respond much more creatively to try to gain it. The child tries to please his or her social environment, and if that environment is loving and relatively consistent, the child finds satisfaction that also feeds back to tell the child that he or she is not only secure but also acceptable and loveable. The child soaks this in wholesale to become a part of a self. This develops a view of one’s self as adequate, as OK. (Winnicott, 1957). If that environment is not friendly or adequate, the child usually subconsciously blames him or herself and starts to form an image of him or herself as inadequate, unlovable, as defective. This may seem odd, but it is really not if you consider that the child does not have the cognitive development to evaluate the behavior of others and has little power over the social environment anyhow. The only element available for trying to please that environment is by taking on guilt and a sense of inadequacy in an attempt to find behavior more pleasing and successful in a dysfunctional environment. Continued failure to please can result in a collapse into a lifetime of depression or, when expressed outwardly, a personality based on anger and rebellion.

Our social environment also comes with rules and regulations, punishments and rewards. Each layer of social life that we encounter as we develop and expand into new surrounding social groups brings a set of necessary conforming behaviors. In fact, conformity to the rules and standards connotes membership and creates a system of rewards and punishments that offers opportunity for success and failure of the individual. This, in turn, creates hierarchy and judgments concerning success that in turn becomes material for self-judgment that adds new attributes to the center. It is this area of self-evaluation and judgment that creates the ego part of the self/ego system. Ego is really the way we evaluate and judge ourselves in relation to family, clan and group norms. Early in life, for the infant, this was an external system. But needs for gaining security internalizes it, making it part of the sense of self; the infant quickly learns the need to fit in. As we grow up it becomes a treadmill. As social interaction widens we find ourselves in competition with others in the group all jockeying for recognition and a better niche. (Horney, 1950). It feels so good to be valuable and superior and these features enhance not only group standing but, because of it, security; the valuable are more protected. Also, as the layers develop over time due to entrance into new societies, conflicts between different rules emerge that bring about internal conflicts in the psyche. Early indoctrination into a religion says you should not kill. Later membership in a military organization says you must kill. Early training says tell the truth and be honest. Later participation in other organizations may say set this aside, implying the end justifies the means.


The present crisis is the result of wrong values – wrong values in man’s relationship to property, to people, and to ideas. The expansion and predominance of sensate values necessarily creates the poison of nationalism, economic frontiers, sovereign governments, and the patriotic spirit, all of which excludes man’s cooperation with man for the benefit of man, and corrupts his relationship with people, which is society. And if the individual’s relationship with others is wrong, the structure of society is bound to collapse. Similarly, in his relationship to ideas, man justifies an ideology – whether of the left or of the right, whether the means employed are right or wrong – in order to achieve an end. So, mutual distrust, lack of goodwill, the belief that a right end can be achieved by wrong means, the sacrificing of the present for a future ideal – all these are obvious causes of the present disaster. One cannot take time to go into all the details, but one can see at a glance how this chaos, this degradation, has come into being. Surely, it all arises from wrong values and from dependence on authority, on leaders, whether in daily life, in the small school, or the big university. Leaders and authority are deteriorating factors in any culture.

– Krishnamurti


The Self/Ego System Part III: The Psychological System


The Inculcation of Belief

So far, we have been in the province of traditional psychology, but we can use this platform to go further and examine how self/ego takes on dangerous superstitions and beliefs. Realize that prior to the infant’s birth the parents’ brains have reached full development and self-awareness. And, at some point, that self-awareness stumbled upon the precarious and unpredictable nature of existence as well as upon unavoidable mortality. They became aware of our fate. From the child’s need for a sense of perfect, ultimate security (which, for a child, is a necessary illusion capable of being created by loving families), the maturing adult realizes perfect security is impossible and great fear can rush in. What can one do? Thousands of years ago, humans invented superstitious ceremonies in an attempt to deceive themselves into thinking there was a way to control the uncontrollable. People found it could work; they found they could deceive themselves. They thought they could make the rains come and death was not really death. But there was a flaw, and it was doubt. Only unquestioned belief could hold the whole illusion together. So, the group had to maintain a constant and consistent flow of belief from one generation to another. The child must receive an inoculation of fear that will find relief by accepting belief. Once in lockstep, group members could experience the feeling of safety that the naive child had. God is the father, and we need to fear and obey him just like we did as a child. If you do not obey his rules, you are bad and need punishment; obey and his protection is yours (Hood, 2009).

Unfortunately, there were outsiders and nonbelievers. Nonbelievers, by definition, are therefore bad and their doubts about one’s beliefs could open the door of overwhelming fear. We have already covered that and how it has divided humanity, created hatred and animosity, and endless wars.


Your belief in God, or your disbelief in God, to me are both the same, because they have no reality. If you were really aware of truth, as you are aware of that flower, if you were really conscious of that truth as you are conscious of fresh air and the lack of that fresh air, then your whole life, your whole conduct, your whole behaviour, your very affections, your very thoughts, would be different. Whether you call yourselves believers or disbelievers, by your conduct you are not showing it; so whether you believe in God or not is of very little importance. It is merely a superficial idea imposed by conditions and environment, through fear, through authority, through imitation.

Therefore, when you say, “Do you believe? Are you an atheist?” I cannot answer you categorically; because, to you, belief is much more important than reality. I say there is something immense, immeasurable, unfathomable; there is some supreme intelligence, but you cannot describe it. How can you describe the taste of salt if you have never tasted it? And it is the people that have never tasted salt, that are never aware of this immensity in their lives, who begin to question whether I believe or whether I do not believe, because belief to them is much more important than that reality which they can discover if they live rightly, if they live truly; and as they do not want to live truly, they think belief in God is something essential to be truly human.

– Krishnamurti


The Self/Ego System Part III: The Psychological System

The Self/Ego Creates Our Psychology

If we distill what we have assembled so far, what we end up with forms the basis of personal and group psychology. A sense of self, complete with an ego system of evaluation according to group and cultural norms, gives rise to reactions about the self — a feedback system: performance in relation to the values of the social group, followed by evaluation, followed by judgment of the self. Since the group and the individual are inseparable, the judgments flow amongst the membership and the differences in performance place the individuals according to hierarchy. In short, the elements of self/ego determine how and what we feel about ourselves and that, directly or indirectly, generates much of our personal and daily psychological reactions. Emotional reactions to self are considered to be far more important than our thoughts about ourselves. We tend to feel we are our emotions and we have our thoughts. The real truth from neuroscience is that our emotions are representations, just like our thoughts and images (Ginot & Schore, 2015). The who we are is neither. If one realized this, the defense of the self via the psychological defense mechanisms mentioned in Part I can be seen as ways of trying to thwart bad feeling about one’s self that are thrust upon us from our cultural setting. In that sense then, the defense mechanisms are defending and perpetuating our cultural norms with us as a representative. Psychological reactions stem from what we identify with and from a need to find some kind of success within the group. If one is high up, success is supported by one’s relative position in the group. However, if one is at the bottom, finding an outside group to look down on will do the job. This is a need for prejudicial feelings concerning outsiders. Unfortunately, the way social tiers are set up means only a few are at the top; they are in control and are careful to limit top tier membership even from others in the group. Most jockey below with their various versions of C, D and F performance and are doomed to feel somewhat, if not terribly, bad about themselves, especially in a secular age where the sense of universal and equal membership in religious belief has eroded. In medieval times, the peasant could be as devout a believer as the king and receive the same reward. Now, in a materialistic and secular age, inequality is dominant and ego must thwart primordial fear in a different manner. (Rank, 1941).


The fact is the content of my consciousness is consciousness. Now how do I proceed from there? Please do listen. How do I proceed to unravel, take out piece by piece the various contents, examine it, throw out, keep, and who is the entity that is examining? The entity which is separate that is examining is part of my consciousness which is the result of the culture in which I have been brought up, saying you are different from what you see, you are a Brahmin, therefore you must approach life from a particular traditional idea. So, one fact: the content of consciousness is consciousness. Then the second fact: if there is an entity which examines each fragmentation of that content, then that examiner is part of the content. And that examiner has separated himself from the content for various psychological reasons of security, safety, protection and also it is part of the culture. So that is the second fact. So the third fact is: if I examine, I am playing a trick. I am deceiving myself. Do you see this?

– Krishnamurti


The Self/Ego System in Relation to Time


Ambition, Addiction, and Preoccupation in a Secular Age

The modern industrial, scientific and materialistic age, with its focus on the individual, presents new and unique problems for the self/ego system. On one hand, cognition thrives, but on the other, the awareness of deep fear associated with uncertainty and mortality cannot find an otherworldly solution. There are still religious believers, but they are increasingly surrounded by weak, semi-believers or outright nonbelievers, as well as a mixture of competing faiths. Belief systems thrive on monopoly but feel very threatened by competing views, as they arouse doubt. However, this age offers fear-obscuring opportunities unavailable and/or unaffordable in past times, except for the extremely wealthy. In the modern world, the hierarchy system goes into overdrive with many more opportunities for claiming status, acclaim, and recognition. Success or desired success breeds ambition, and ambition provides preoccupation, and preoccupation puts fears at arms length due to the excitement of pursuits. Preoccupation takes on many forms that get hard to separate from addiction. It is fear and pain that drive much addiction, and addiction takes on far more forms than are usually recognized (Rank, 1941).

The substances are well known and usually provide temporary direct pain relief. Bodily pain can lead people into addiction, but the classic use is for relief from psychological pain, and this type of pain is directly related to the ego. The individual’s self-representations and corresponding value/rule systems are perpetually in conflict in a way that the person is suspended in painful self-judgments and self-images. This type of self/ego configuration also brings about deep feelings of emptiness, and loneliness and a search for some form of love/companionship to fill the void. It is called codependency and the cure cannot be found outside of one’s self. The codependent person is looking to receive the love a child gets from parents, and that era is over. A question comes up, though, when it is asked why victims find it so hard to change if their personal reality is so painful? The answer is that surrendering one’s sense of reality and working to piece together a more comfortable one can be confusing and frightening, especially at the subconscious level. Imagine having no way to place yourself in relation to others, no way to understand what your social world is all about. After all, the infant works overtime to get this down, as it is so important. And, you may remember from Part I about congruence, that inner and outer worlds need to fit together and reinforce each other. Dismantling one’s sense of self also means dismantling one’s relationship about the outer world too. I think this also implies that any self/ego configuration, regardless of how comfortable or uncomfortable, will resist being doubted or closely examined.

There are many other softer, but still addictive, preoccupations that are more activity oriented, but they still rely on the provocation of chemical changes in the brain to plug fear receptor locations in synapses. The provocation of adrenaline is often the chosen path. All sports, both by participation and viewing, work this way. And, by identification, the viewer can see themselves as vanquishing the enemy in victory. After all, part of self is anything identified with. Enemy vanquishing originates in the need to eliminate the doubter and/or appositional beliefs; vicarious nonlethal victories can also provide diversion from ego fear. Gambling, sex and the many forms of consumer activities provide diversion via excitement and can become as dangerous to one’s well being as substance addiction. Most of the non-substance activities and products are legal and considered essential for profitable capitalism. They are promoted, and children are inoculated via the media from the start just as they are in religious settings concerning the passing along of formal spiritual belief. Basically, I feel we have a society of addiction whose core beliefs support and promote the consumer society.


One has a thousand and one habits, the way you brush your teeth, comb your hair, the way you read, the way you walk. One of the habits is wanting to become famous, wanting to become important. How is the mind to become aware of all these habits? Is it to become aware of one habit after another? Do you know how long that would take? I could spend the rest of my days watching each habit and yet not solve it. I’m going to learn about it, I’m going to find out, I’m not going to leave it. I am asking, is it possible for the mind to see the whole network of habits?

How is it to do it?…

How do I watch one habit, which is twiddling my fingers, and see all the other habits? Is that possible with such a small affair? I know I do it because of tension. I can’t get on with my wife, and so I develop this peculiar habit, or I do it because I am nervous, shy, or this or that. But I want to learn about the whole network of habits. Am I to do it bit by bit, or is there a way of looking at this whole network instantly?

– Krishnamurti


Now, much that I have just criticized is, by itself, harmless or even necessary. Much in the modern world has improved life immeasurably. The problem comes when the need for diversion and preoccupation, derived from ego needs, becomes a predominant factor. And, as far as rules are concerned, I am not proposing that rules in society are all bad. Rules that organize the efficient functions of society provide us with greatly enhanced security and life quality, like the rules of the road. But when rules are extended into the realm of belief attempting to distort reality, the system becomes sinister. Rules that govern how we define and judge ourselves and others brings about problems both within, regarding our personal sense of value and self worth, and without, concerning our relationship with others. Needs for dominance, control and a sense of superiority are all derivatives of the self/ego system in its quest for a sense of righteousness and/or diversion (Pinker, 1997).

Conflicted Relationships within the Self/Ego System

As we have discovered, the self-system is an accumulation of impressions of the self that are layered over time from interactions with our social environment. It seems to have been motivated by not only a need to find security in the social organization sense but also to find a way to assuage the personal shock of discovering that there are many threats and dangers to life that culminate in our demise. Cultures and societies offer various remedies, ranging from ancient, religious beyond-life’s-realm solutions to here-and-now social diversions. But, to gain access to these solutions, one must adopt the accompanying standards, codes and rules. This sets in motion the interactive dynamics of the self-system in the form of constant observation and appraisal as to one’s performance and hierarchical situation. Life becomes a quest to advance both positions, and this requires conformity and struggle. But getting better is fraught with problems, since the self-system is filled with conflict and contradiction. The struggle is created by projecting who we think we are struggling with or who we think we should be.

There are also possible struggles with potentials buried within our genetic being that are ignored in the act of conformity. Struggles can also occur when fundamental, genetically grounded sensibilities conflict with group values and standards (Milgram, 1974; Horney, 1950).

The self, being an imaginary construct in a hopeless quest for perfect security, is also a very vulnerable system to doubts and criticism from both within and without. It is easily hurt and insulted, made jealous or envious. Taken together, this is a system capable of producing continuous, and possibly volatile, psychological reactions, especially sanctimonious emotional reactions that “feel” like who we are. Reactions like this are a huge ego boost and affirmation of superiority.


I have an image about myself: I am a great man, or I am this or that. And that image has been created from childhood: you must be somebody – Julius Caesar if possible, or a great saint if possible, or the top executive, or one of those politicians. You must be somebody. And gradually one builds up an image about oneself – noble or ignoble, insufficient or sufficient, there is that image in most people. And when you say something harsh, being my wife, husband or friend or neighbour, I am hurt, which is, the image is hurt, which I have created about myself. That image is me. And when I say I am hurt, I am saying not only the image which I am, but also the maker of that image. So I am not different from the image which I have built about myself. And when there is hurt, it is the image that is hurt, with which I have identified myself as the me, so I say I am hurt. And the whole society, the social structure, the moral, the religious structure is helping me to maintain that image. And as long as I have that image I am going to be hurt. Do what I will, try to suppress it, run away from it, analyse it, go to an analyst, and all the rest of it, it will always remain because I have this image about myself. Now the question is: is it possible to live without a single image? Ah, that is the real question.

– Krishnamurti

The Ego/Self-System Part III: The Psychological System

The Self/Ego System in Relation to Time

Stripped of complexity, the self is composed of random, incomplete, fragmented and biased self views held together by emotional and cognitive memory bits. It is of the past resurfacing in consciousness to dominate and distort current perceptions. The ego, on the other hand, issues from the past as codes, standards and values associated with various group memberships that are projected into the future as behavioral goals. The system creates our sense of the past and the future, neither of which are real (see article). Likewise, and coming from the same source, chronic fear is retained in memory and projected into the future as what could or will happen to us. This, then, is the uniting element of chronic fear with the self/ego system and time. I think it is marvelously captured in the Buddha’s discovery of old age, disease and death that became his motivation for renouncing all the diversions and privileges of his noble position and begin a journey to seek an end to suffering. He experienced traditional paths, but only when realizing their inadequacy did he enter the pathless land to find his answer.


You are nothing. You may have your name and title, your property and bank account, you may have power and be famous; but in spite of all these safeguards, you are as nothing. You may be totally unaware of this emptiness, this nothingness, or you may simply not want to be aware of it; but it is there, do what you will to avoid it. You may try to escape from it in devious ways, through personal or collective violence, through individual or collective worship, through knowledge or amusement; but whether you are asleep or awake, it is always there. You can come upon your relationship to this nothingness and its fear only by being choicelessly aware of the escapes. You are not related to it as a separate, individual entity; you are not the observer watching it; without you, the thinker, the observer, it is not. You and nothingness are one; you and nothingness are a joint phenomenon, not two separate processes. If you, the thinker, are afraid of it and approach it as something contrary and opposed to you, then any action you may take towards it must inevitably lead to illusion and so to further conflict and misery. When there is the discovery, the experiencing of that nothingness as you, then fear—which exists only when the thinker is separate from his thoughts and so tries to establish a relationship with them—completely drops away.

– Krishnamurti


Robert is a retired mental health counselor and lifetime student of Krishnamurti.

Electric cars: China powers the battery supply chain

The US and Europe fear the country’s dominance of the global market in lithium

Henry Sanderson in Xinyu, China




In a factory beside a paddy field on the outskirts of a small city in central China, one of the core components of the modern global economy is being produced.

Inside a warren of cement and steel pipes, rock — mined in Australia — is heated to 1,000C in a giant coal-fired boiler. It is then leached with acid, dried and purified into a fine white powder that carries the charge inside a battery that enables an electric car to drive. The product, lithium carbonate, sells for more than $11,500 a tonne and global demand is expected to double by 2023, according to Volkswagen.

“This all used to be countryside,” a young staff member says in the company electric car, a black Tesla Model S, as it approaches the factory gates.

The city of Xinyu supplied lithium to China’s nuclear weapons industry in the 1960s, part of Mao Zedong’s push to place industry deep into the rural heartland of the country in case of a nuclear attack. Now the city supplies Tesla, BMW and VW, making it a vital node on the global electric car supply chain — the 21st-century equivalent of the refineries, pipelines and ships that supported the age of oil-based transport which batteries could eventually replace.




In the space of a few years Chinese companies have become some of the world’s largest producers of lithium, a lightweight metal that is a key raw material for batteries. They have bought up mines from Australia to South America and are building plants in China to make lithium chemicals and batteries.

The latest example of China’s ability to channel prodigious amounts of capital to fast growing industries, the country produced over 60 per cent of the world’s lithium in April, compared with less than 1 per cent from the US, according to Benchmark Mineral Intelligence.

China’s dominance in the electric car supply chain has triggered growing concerns in a trade-war obsessed Washington and Brussels, with both fearing that they could be squeezed out of the next generation of industry. At the beginning of May two US senators, Lisa Murkowski and Joe Manchin, proposed a bipartisan bill designed to boost US production of critical minerals such as lithium. And the European Investment Bank has pledged €350m to back Swedish battery start-up Northvolt, which aims to build a battery factory in Sweden and source raw minerals such as lithium from Europe.




The brine pools of SQM's lithium mine in the Atacama desert, northern Chile © Reuters


At a time when western governments are watching Chinese industrial policy for signs of unfair advantage, one of the interesting features of its new prominence in lithium is that it has not been achieved by the state-owned companies. Instead, it is the product of a group of entrepreneurs who “jumped into the sea”, as the Chinese call the launch of a private business — sensing an opportunity in batteries for mobile phones and then electric cars. Revenues for Ganfeng Lithium and its larger Shenzhen-listed rival Tianqi Lithium have risen from around $100m a year to over $1bn in a decade, joining the ranks of the largest producers.

“The Wild West nature of Chinese capitalism has allowed companies to grow that quickly,” says Sam Jaffe, managing director of Cairn Energy Research Advisors, who analyses the battery market. “The government gives signals that a land rush is starting and then you have these entrepreneurs that get in their stagecoaches and gallop as fast as they can to get to the land. Some of them win [but] a lot of them lose.”


Qinghai, China. A billboard featuring Chinese President Xi Jinping promoting the production of lithium used to power the country’s electric vehicle revolution © Bloomberg


For most of the 20th century the US was the largest producer of lithium, but the Kings Mountain mine in North Carolina shut in the 1980s after competition from Chile. After that the market was dominated by a cosy oligopoly known as the Big Three: SQM of Chile, which was controlled by the son-in-law of the country’s former dictator Augusto Pinochet, and US producers Albemarle and FMC. In 2015, Albemarle acquired rival US producer Rockwood and last year FMC split off its lithium business into a separate entity, New York-listed Livent.

Founded in 2000 by Li Liangbin, who previously worked for a state-owned lithium plant, Ganfeng began life as a customer of SQM, helping to purchase the lithium extracted from the Atacama Desert in Chile. In his office in Shanghai, vice-chairman Wang Xiaoshen remembers that in 2004 Mr Li offered a 15 per cent stake in Ganfeng to SQM, in order to secure lithium supplies.

“At that time SQM hired Deloitte to do due diligence and after that [SQM] quit. It said ‘no thank you’. Ganfeng at that time was a very small company,” recalls Mr Wang, who had worked for the country’s first lithium plant in the far western city of Urumqi, in Xinjiang.



Instead, Ganfeng became a competitor: listing on the Shenzhen Stock Exchange in 2010 and starting to secure supplies of lithium around the world. In September 2015 it bought a stake in the Mount Marion mine in Western Australia, eventually building this into a 50 per cent stake.

It also has a 9 per cent stake in another Australian miner Pilbara Minerals, which owns one of the largest hard rock deposits of lithium, the Pilgangoora project that came with a 10-year supply agreement for its lithium. This week Ganfeng said it would buy a 30 per cent stake in London-listed Bacanora Minerals, which is developing a lithium project in northern Mexico.

Ganfeng agreed a 10-year supply deal with VW last month. The carmaker aims to launch more than 70 electric car models over the next 10 years — a target of 22m electric vehicles by 2028.

“Lithium will in the near future be one of the most sought-after raw materials on earth,” VW said.

But it is in Argentina where Ganfeng’s most ambitious project is taking shape, one that could turn it into a truly global company. In 2018 Ganfeng bought a 38 per cent stake held in the Cauchari-Olaroz project from SQM. Then in April it agreed to boost its stake in the project to 50 per cent, paying $160m in a deal that is set to close in June.


A stacked bar showing the total global supply by country for raw materials. Lithium, lithium chemicals, Cobalt and refined cobalt

Situated in one of Argentina’s poorest areas, in the far north-west Jujuy province, the project will extract lithium from brine beneath the desert by evaporating it in the fierce desert sun. It aims to begin production in the second half of 2020, with a target of 25,000 tonnes a year of lithium carbonate.

“If you look at the long term the demand is coming,” Ganfeng’s Mr Wang says. “This year traditional [carmakers] have launched their EV models. So that will generate demand for sure.”

In the same area as Cauchari is a solar power plant being built by a Chinese construction company and backed by Import-Export Bank of China. With 1.2m solar panels it will be the largest solar plant in South America. It will help provide the energy to pump the brine from beneath the desert. Ganfeng teams on the ground will have to overcome myriad difficulties, including finding translators who understand lithium as well as Chinese. Only one other lithium company operates in the area, Australia-listed Orocobre.

“In this little puna [plateau] at 4,000 metres we’re going to have over 1,000 workers between the solar project and Cauchari and Orocobre,” says John Kanellitsas, a former investment banker who is executive vice-chairman of New York-listed Lithium Americas, which is developing the project in Argentina with Ganfeng.




Qinghai Salt Lake Company, western China, produces potash fertilizers, potassium chloride and lithium carbonate, among other products © Bloomberg


Across the Andes in Chile, Ganfeng’s rival Tianqi has been expanding its presence, led by Vivian Wu, a 45-year-old former English teacher who previously worked for Nokia. Last year Tianqi spent $4.1bn for a 24 per cent stake in SQM, gaining three seats on its board.

The deal was fiercely opposed by the company’s largest shareholder Julio Ponce Lerou, Pinochet’s former son-in-law, who lost control over the company last year. He said it would give Tianqi sensitive information about a rival. Mr Ponce Lerou filed a lawsuit to block the deal, but it was dismissed in October by Chile’s antitrust court.

Tianqi’s founder Jiang Weiping got his first big break after he managed to buy a state-owned lithium plant in Sichuan in 2004 for Rmb11m ($1.6m at today’s exchange rate). Mr Jiang had been supplying the plant with lithium from Australia. The local government suggested he take it over to resolve their debts, as it was close to bankruptcy, according to Ms Wu. Today the plant produces around 17,000 tonnes a year of lithium.




Ganfeng has signed a deal with Volkswagen, which plans to produce 22m EVs in the next 10 years © Reuters


Mr Jiang’s second break came in 2012 when he won a bidding battle against Rockwood for control of the world’s largest lithium facility, the Greenbushes mine, which had been in operation since the days of Australia’s gold rush in 1888. It was like “a snake eating an elephant”, according to one Tianqi employee.

To win the deal Tianqi started to buy up shares of the Canadian-listed company that owned the mine, Talison Lithium. Then, once it had breached the 10 per cent threshold for disclosure, Mr Jiang offered a price for Talison that was a 15 per cent premium to Rockwood’s offer, backed by financing from China’s sovereign wealth fund.

Tianqi had faced the risk of losing its key supplier if it had not bought Greenbushes, according to Ms Wu, who joined Tianqi in 2009. “We knew it was something we had have to grow in a sustainable way.”

Tianqi’s deal for SQM has surprised analysts and investors, however, since it does not give the company a majority stake or control over SQM and has left the company heavily in debt. Tianqi cannot appoint any of its own employees as directors, as part of an agreement with Chile’s antitrust regulators.

But Joe Lowry, a lithium consultant who worked for FMC in Asia in the early 2000s, argues that Tianqi is waiting for the day when Mr Ponce Lerou may be willing to sell. That could give Tianqi a stronger foothold in one of the lowest cost lithium producers, just as sales of electric cars become mainstream.

Chinese companies will become the “stewards of the overall lithium market”, according to Mr Jaffe. “Their goal is not to be Chinese players but to be global players.”




A battery factory in Jiangsu province. China has provided up to half of global investment into lithium over the past few years, according to FMC © AFP


The rapid spending by Chinese companies has prompted some of the Big Three producers into action. In November Albemarle agreed to pay $1.15bn for a 50 per cent share in the Wodgina lithium project in Western Australia.

Paul Graves, a former Goldman Sachs banker who runs Livent, told the FT in March that he was also keen to acquire more lithium resources in Argentina and Australia. Livent is one of the key suppliers of lithium hydroxide, the type used by Tesla, from its Salar del Hombre Muerto project in Argentina.

“If you look at the money that’s gone into lithium over the past few years, it is well over 50 per cent Chinese,” Mr Lowry says. “But that was open to everybody, this wasn’t a rigged game. The Big Three as a collective group were too set in their ways. China is investing ahead of the curve.”

In Xinyu, Ganfeng has plans to move up the value chain into battery production. At another plant nearby, robots silently assemble sheets of battery materials to be made into lithium-iron phosphate batteries, the technology used by China’s electric buses, which are part of the world’s largest fleet.




A Qinghai processing plant. The expansion of China’s lithium sector has been driven by private businesses sensing an opportunity in batteries for mobile phones and electric cars © Bloomberg


And a 40-minute drive away in Yichun workers handle highly reactive rectangles of solid lithium metal using gloves inserted into an airtight container full of argon. Ganfeng is the world’s largest producer of pure lithium metal, a product that is set to play a key role in solid-state batteries. These next-generation batteries promise to store significantly more energy for the same weight than current batteries, helping cars to drive as far as their petrol-powered counterparts on one charge.

Ganfeng is currently testing solid electrolyte batteries for the drone industry but aims to make its own solid-state lithium metal batteries for electric cars.

Mr Wang, who has just returned from a meeting with Argentine president Mauricio Macri, says he is still keen on more lithium acquisitions. “But we don’t want to spend too much money too early,” he adds.

Iran and the Problem of Occupation Warfare

For the U.S., defeating the Iranian military wouldn’t be the end of the war.

By George Friedman

 

There has recently been a lot of talk about a war between the United States and Iran. In my view, it’s unlikely because the risks are too high for both countries. Iran can’t take the chance that its military would be destroyed, and the U.S. can’t accept the costs a real victory would entail. Since Korea, the United States has performed poorly in war, with the exception of Desert Storm, when the destruction of Iraqi forces allowed U.S. entry into Kuwait and no Kuwaiti resistance to American occupation emerged. But in Vietnam, Afghanistan and Iraq, the United States faced the problem of what I would call occupation warfare, a type of combat that carries a substantial price even after the initial war has been won.
 
The Three Phases of War
Military theorist Carl von Clausewitz posited that there were three phases of war, each requiring different capabilities of warfare. The first phase is breaking the enemy’s military force, what we typically think of as military combat. The second is occupying the country, which involves the physical occupation of the defeated country and the establishment of the instruments of governance, production and consumption. The third is breaking the enemy’s ability to resist, which involves not only breaking its morale but also destroying any desire of the population to fight back against the occupiers.

The second phase is necessary because defeating an enemy military without occupying the country opens the door to the establishment of a new military force in the defeated country and a return to the strategic threat that sparked the war in the first place. After World War II, for example, the Allies had to occupy Germany and Japan or risk leaving in place the ability to resume the fighting and the political forces that posed the threat to begin with. In the final peace negotiations, therefore, the Americans insisted on occupation despite Japan’s resistance to it.

But the third phase of war didn’t emerge in either Japan or Germany for two reasons. First, and most important, the Allies had attacked not only the military but also the civilian population. Modern war involves hitting industrial targets, and factories are surrounded by people. Attacking the enemy’s industrial base means attacking its population, which dissolves any will to resist in the first place. The population, therefore, didn’t resist and the third phase never developed.

Second, even had there been a will to resist, the occupiers tried to rapidly identify weapons caches and destroy them. Leftover weapons could have been used to reignite the fighting, but eventually, new supplies would have to be obtained. Some might be stolen from the occupation force, but, with some exceptions, creating a force to resist the occupation requires an outside power willing to deliver materiel and a base from which to distribute it.

In Iraq, the United States defeated the Iraqi army within weeks and was able to quickly occupy the country. But the Iraqi army’s weapons had been cached in a number of places, and many Iraqi troops took weapons home. The United States had destroyed the Iraqi army and occupied the country but then faced the emergence of a force that had both the will and weapons to resist, obtained from both within and without the country. The United States failed at that third phase of war.
 
The Urge to Resist
In occupation warfare, the occupied have no hope of defeating or inflicting significant damage on the occupying military. But they can use their advantages to undermine the occupiers’ will to resist. The resisting force has several advantages, chief among them moral superiority. It is their country that’s being occupied, and the urge to resist is easy to generate. In addition, they have superior intelligence to the occupier and, therefore, a deeper sense of what’s happening. If the terrain permits, they can use it to cloak themselves. In urban environments, the city can make them invisible. Rooting the resistance out of a city is difficult and requires gathering intelligence from the civilian population, but their willingness to help is limited by their sympathy for the resistance, hatred of the occupier and fear of retribution. When the occupier carries out operations in populated areas, civilians are inevitably killed or wounded, increasing the population’s hostility and decreasing the opportunity for cooperation.

This is why occupation warfare is so difficult. It requires the occupier to craft a strategy appropriate for the occupied country, one based on knowledge of the country that the occupying force doesn’t have. The occupier, therefore, can’t obliterate the resisting force, but the resisting force can strike as and where it chooses, depending on its capability.

This means that the occupied win so long as they are not defeated, and the occupiers lose so long as the resistance continues. The resistance will try to create an unending war not because it expects to win but because it wants to break the will of its enemy to remain in the country. War must have a purpose and an end. The purpose for the resistance is clear. But over time, even the relatively low casualties being inflicted on the occupiers compel them to reconsider the political value of continuing to wage war. Clausewitz pointed out that war is the continuation of politics by other means, and that is nowhere truer than in occupation warfare. For years, the war can drag on with the assumption that withdrawal would undermine international credibility and that the occupier cannot allow itself to be defeated in this way. But in due course, the price of withdrawal becomes lower than the cost of maintaining the presence.

Occupation warfare, against a motivated and supplied resistance, is the most difficult type of warfare. It breaks an occupier not by main force but by steadily draining its resources. Some might say that the resistance cannot withstand overwhelming and brutal force. That may be true in some instances, but consider the German attempt to suppress Soviet partisan fighters and communists under Tito. The Germans had occupied the territory but couldn’t defeat the resistance despite extraordinary brutality. The partisans had the Pripet Marshes to hide in. Tito’s force had mountains. Both had a degree of outside supply. And both were highly motivated by the fact that surrender meant death. The very brutality of the occupier put steel into the resistance.
 
The Seduction of Victory
The United States can certainly destroy the Iranian military. It can also likely occupy Iran, but it would then be forced into occupation warfare. The Iranians would lose control of their country for an extended period of time. The costs would be too high for each side. The U.S. could of course bomb Iran, but only one country has ever capitulated after facing airstrikes alone: Yugoslavia in the Kosovo War. And even in this case, the capitulation had more to do with foreign diplomacy than the pain of war. Air power can cause tremendous damage but likely won’t force a country to back down. The end of war requires a political shift in an enemy, and air power usually can’t impose such a shift.



The United States has had experience with occupation warfare in Afghanistan and, in some sense, in Vietnam. In each case, the ability of the enemy to impose extended occupation warfare on the United States compelled the U.S., in the long run, to accept an outcome that was previously unthinkable. In Iraq, the German and Japanese examples from World War II led to the assumption that the final phase would not involve resistance. But those examples, it turns out, didn’t apply to the Iraq War.

There will be mutual threats and possibly even airstrikes and counterstrikes. But the destruction of the Iranian military would lead to occupation and necessitate breaking the will to resist. The dangers of occupation warfare are well known, but the calm after the destruction of the enemy’s military is the most dangerous point in war. It seduces the victorious government into imagining that this time will be different. It rarely is.

Doug Casey on False Flags and Pretexts for the Next War

by Doug Casey



International Man: People who look outside the mainstream narrative of historical events often encounter the term "false flag" attack. What does this mean exactly? Who uses this tactic?

Doug Casey: Let’s define this term exactly. The Oxford Dictionary defines a false flag as "A political or military act orchestrated in such a way that it appears to have been carried out by a party that is not in fact responsible."

The concept of false flags has gotten a bad reputation in media and government circles and perhaps with the population in general, because they’ve come to be associated with conspiracy theories. And "conspiracy theory," whether valid or not, is used as a pejorative. While there are definitely some people out there with tin foil hats, the establishment likes to label any beliefs that don’t follow the party line as conspiracy theory.

In fact, false flags make all the sense in the world for someone who wants to start a war or who needs a cover for some other criminal enterprise. You never want to be seen as the aggressor or the bad guy. You always want to be able to blame what happens on the other guy. If you’re going to start a war, you want to look like the innocent aggrieved party in order to get the population on your side.

It’s been said that in war, truth is the first casualty. Using a false flag to disguise criminality is an essential part of that. And it’s not just one of the two major parties in a war who uses false flags. It can be a third interested party that is looking to create trouble between the other two.

I’ll use a schoolyard analogy. Sometimes a third party goes to Billy and says that Joey is badmouthing him. He’ll then go to Joey and say that Billy is badmouthing him. A "third party" can create a lot of mutual antagonism where it didn’t exist before. There are plenty of variations on the false flag routine.

I’d go so far as to say that most wars are started with false flags in one way or another, where the real bad guy is disguised.

The people who run nation states are never of the highest moral character. In fact, when it comes to political leaders, the scum rise to the top. These people are necessarily Machiavellian and capable of anything; they have to be in order to claw their way to the top of the political snake pit. Even if a person is basically decent when he gets into politics, he’ll inevitably be corrupted by his environment—and the fact he’s expected to exert power and use force to preserve the interests of the State. You can expect mainly duplicity and sanctimony from them.

International Man: There have been many instances of false flag events that have changed the course of history—by leading to wars, military interventions, and political upheavals. What do you think are some of the most notable historical examples, like the Gulf of Tonkin for instance?

Doug Casey: That’s an excellent one. The Gulf of Tonkin was entirely fabricated by the Johnson administration, which was looking for an excuse to invade Vietnam.

In recent history, when the Japanese needed an excuse to invade China in 1931, they fabricated what’s known as the Mukden Incident, the destruction of a railroad line in Manchuria. When the Germans invaded Poland in 1939, they fabricated what’s known as the Gleiwitz Incident, dressing up German soldiers in Polish uniforms to make it look like the Poles were the aggressors. In 1962 the US created Operation Northwoods, which plotted all kinds of incidents—shooting down a US airliner, sinking US ships—to blame it on Cuba. That plot was, fortunately, never executed.

This is standard operating procedure when you want to start a war. You need a casus belli—a cause of war—but you want to blame it on the other guy.

More recently, take the 1991 Gulf War, which was simply an issue of criminals in Iraq trying to oust the criminals running Kuwait, mainly the Sabah family. The media immediately circulated a meme that Iraqi soldiers were taking Kuwaiti babies from their incubators in hospitals and putting them on a cold floor so they could send the incubators back to Iraq.

Then it was discovered that the source of this information was the daughter of the Kuwaiti ambassador, who never gave a subsequent interview. It was all a lie, but before the truth came out, the damage was done.

You can’t believe anything that you hear regarding a war, nor any of the reporting regarding a war. Psychological warfare is as important as the kinetic warfare, certainly in today’s world.

International Man: It almost doesn’t matter that the truth comes out in the long term. By then the damage is already done. As long as the propaganda serves its purpose to create the intended reaction in the short term, that’s what really counts.

Another recent example of this is in Syria, in which a suspicious incident prompted a direct US military response.

Famed investigative journalist Seymour Hersh claimed that an alleged chemical weapons attack in Syria—supposedly committed by Syrian President Bashar al-Assad—was in fact a staged false flag event designed to trigger US military intervention. What do you make of this?

Doug Casey: Hersh is one of the very few reporters who does original research and thinks for himself. There was nothing in it for the Syrian government and Assad to launch these chemical attacks. They’re well aware that it would only damage their image. Entirely apart from the fact that chemical weapons are almost as dangerous to the people who launch them as they are to the people they’re launched at. Plus, they were militarily completely unnecessary.

So, it seems to me it’s another false flag launched by who knows what party to make the Assad government look bad. To make Assad into a new devil, like Saddam. Assad is no saint, but he’s a natural consequence of trying to hold together dozens of mutually antagonistic religious and ethnic groups. But that’s another story, for another conversation.

Incidentally, people forget that Assad was our ally in the 1991 Gulf War. He was our subsidized ally of the moment, just as Saddam himself was a US ally of the moment when he launched a war against the Iranians in the ’80s.

The fact is that Americans know little about anything abroad, beyond what they see or hear on TV and other mass media. Most "reporting" is just a rehash of official press releases.

International Man: Recently, two oil tankers were attacked near the Strait of Hormuz in the Persian Gulf. The US government said Iran did it. Iran said it was a false flag attack. What is going on there? Do you think we’ll soon see a suspicious event used as a casus belli for another war in the Middle East?

Doug Casey: I’d say the chances of the Iranians having done that are slim or none. The last thing the Iranians want is to look like they’re trying to disrupt a quarter of the world’s oil supply and perhaps provoke the US into attacking them. They have nothing to gain from it. So, it’s a question of cui bono.

It could be the Saudis who fabricated this; they’re enemies of Iran but have a completely worthless military. They’d rather trick the Americans into doing the fighting. It could be the Israelis. They’re very antagonistic toward Iran, which is the last country in the region capable of mounting a military challenge against them.

It could be another third party that we’re not even thinking of at this point, which would benefit from the US getting bogged down in yet another war pounding the Iranians.

I’m skeptical of anything that I read in the papers or see on television. Chances are excellent the tanker explosions were fabricated, twisted, or misrepresented.

It bears mentioning that the US Navy doesn’t belong in or near the Persian Gulf any more than the Chinese or the Russian navies belong off California or in the Gulf of Mexico, 20 miles off the American coast.

It’s provocative. The US gets very little oil from the Persian Gulf. Most of that oil goes to Asia—the Chinese, Indians, and Japanese. This is not our problem.

The US is not the world’s policeman, and the rest of the world resents being bossed around.

The US is putting itself in a position to provoke a major war. Not just another sport war, like those in Afghanistan and Iraq.

International Man: What does it say about the nature of the US government—or any government—that would use a false flag to sell its citizens a war?

Doug Casey: Well, let me say it again, most of the people at the high levels of government are actually criminal personalities who are capable of absolutely anything.

Once it hardens into an "us" against "them" situation, it will be very dangerous for anybody in either country to speak out against the war. Even H.L. Mencken went silent once the US got into World War I, even though it was obvious our involvement was fomented by Woodrow Wilson—who prosecuted outspoken opponents of the war. The chances of your being labeled a traitor and jailed—or stoned by the mob—is extremely high once the first shot is fired.

As Randolf Bourne famously said, "War is the health of the State."

War is always destructive of individual freedom and always increases the power of the State.

International Man: It’s true that war can lead to unpredictable negative consequences for civil liberties at home. What can people do to protect themselves?

Doug Casey: You don’t want to be in a country that’s fighting a major war. You want to be in a neutral and isolated country—although the nature of the next major war will make it so that there’s almost no safe place to hide. But some places will be safer than others. As a matter of fact, your biggest danger may not be "the enemy." Your biggest danger may be your so-called fellow citizens.

It’s very important to have a backup. Anything can go wrong anywhere.

Anyone who has the means should have a second residence outside of their home country, and perhaps a second citizenship and a second passport. You never know when any government might decide to round up the usual suspects. And during wartime everyone and anyone is suspect. At that point it’s wiser to get out of Dodge.

Editor’s Note: Tensions with Iran could soon explode. In the past 2 months, six oil tankers were attacked near the Strait of Hormuz. And yesterday, Iran admitted to shooting down a US drone it says was flying over its air space. The situation could spiral out of control very soon and cause oil prices to spike overnight.

The next oil shock could be a lot closer than many people think.