Sept. 27 (Bloomberg) -- Is America's gadget fixation lifting Asians out of poverty or pushing them deeper into it?

That has been a question ever since press reports suggested that Apple Computer Inc.'s iPod music players are being assembled in sweatshop conditions in China.

Workers were being forced to toil for as little as $50 a month under Dickensian conditions, one commentator said. Poor Asians, mostly women, were caught in this vicious cycle because Americans are addicted to gizmos, another rued.

Amid the hysteria, Apple began its own audit of the factory, which is situated in China's Shenzhen special economic zone and is owned by Foxconn Technology Group, a unit of Taiwan's Hon Hai Precision Industry Co.

The findings, unveiled last month, are interesting.

Air-conditioned hostels, Apple's auditors discovered, are available to workers free of charge; the dorms have TV rooms, free laundry, snooker tables and public telephones; the campus comes with soccer fields, a swimming pool, supermarkets, Internet cafes, banks, 13 restaurants and a hospital.

There's no child labor; no one is paid less than the locally mandated minimum wage; male and female employees are housed in separate dormitories; safety isn't a concern.

Everyone has medical coverage.

The biggest complaint of workers: a lack of overtime opportunities during non-peak periods.

This is a sweatshop?

The assembly-line jobs in export industries may seem dreary, exacting and unrewarding to an analyst in Europe or the U.S., but they are far better than what's available in the domestic sectors of a developing Asian economy.

Radios to IPods

If Hon Hai went to the chief minister of any Indian state and said it would create 200,000 jobs, the same as in its Shenzhen unit, it just might get the land for free.

The interdependence of the Asian producer and the American consumer is a mutually beneficial one in a world where labor can't move freely to close the wage arbitrage.

Making electronic goods for the U.S. -- with American or Japanese technology and investments -- has proven to be the shortest route to riches in Asia in the past 50 years.

In the mid-1960s, Japan made nine out of 10 portable radios sold in the U.S. By the end of the 1980s, Singapore accounted for more than three-fifths of global disk-drive shipments. In the past decade, South Korea has emerged as the global leader in dynamic random-access-memory semiconductors, used in personal computers, even as consumer electronics found a home in China.

Today, China is the acknowledged leader in flat panels, computers and mobile phones. As Chinese wages rise, some of these industries will look for the next low-cost location.

And that might be India.

Asian Prosperity

Over the years, the products and the technology have changed. Asian factories have become larger and supply chains more integrated, both regionally and globally. But the principle has remained the same: Make what Americans will buy.

Has it been a worthwhile strategy? Undoubtedly, says Michael Spencer, chief economist for Asia at Deutsche Bank AG.

Spencer suggests we look at China, Hong Kong, Singapore, Taiwan and South Korea, which together command 12 percent of world exports, a fourfold increase from 1960.

In this period, the real per-capita gross domestic product in these five Asian nations has grown 11-fold, compared with a threefold increase in the U.S. and the U.K.

In China's case, the prosperity came after it began manufacturing for export markets in the late 1970s. From 1960 to 1979, China's real per-capita GDP had risen just 50 percent.

A sharp contrast to the Asian model is to be found in Latin America, where thanks to inward-looking import-substitution policies, average incomes have merely doubled over the past 50 years.

Global Benchmarking

According to Spencer, a focus on exports helps a developing country benchmark its manufacturing practices against the best globally. Capital is better utilized when it goes into making what the world's most sophisticated consumers want. No wonder the merits of the East Asian strategy are now better understood in Latin America, as well as India.

``It is the most successful model for development the world has ever seen,'' Spencer says. ``If you look at other emerging economies, they are trying to orient themselves the same way.''

That's why, according to the ``revived Bretton Woods hypothesis,'' Asian central banks will buy any amount of U.S. Treasury securities to keep funding the American spending habit.

Flip Side

None of this is to contend that Hon Hai workers in Shenzhen are living in a capitalist utopia. Work weeks are often longer than the stipulated 60 hours.

Accommodation is of considerably poorer quality for those workers who are forced to live outside the campus. After Apple published its audit report, Hon Hai said it would hire more workers and build more dormitories.

Hon Hai and Apple would surely keep their promises. The Taiwanese company has a market value of $31 billion, almost half that of Apple. That's a lot of corporate reputation at stake.

The biggest winners will be the Chinese workers and their families. Millions of Asians have fed the American craving for consumer goods and crawled out of poverty within one generation, as the Hon Hai workers in China surely will.

(Andy Mukherjee is a Bloomberg News columnist. The opinions expressed are his own.)

To contact the writer of this column: Andy Mukherjee in Singapore at amukherjee@bloomberg.net.

Last Updated: September 26, 2006 15:02 EDT