In April 2003, the toppling of Saddam Hussein's statue in Baghdad's Ferdowsi Square led news broadcasts around the world. Iraqis thronged their capital's main square as the bronze monster was yanked from its feet. After 30 years of brutality and neglect, and three weeks of war, they could finally imagine a life of political freedom, personal liberty and the basic material necessities.

And the Americans had every reason to deliver. Self-interest and even, by the historical standards of hegemonic powers, a basic decency seemed to underwrite America's guarantee. For collateral, the world's only superpower offered its own endless resources, support from 40 nations, and the desires of the Iraqi people themselves. The crowd did not even seem to mind that it was the Stars and Stripes that was draped over the fallen dictator's massive bronze head. It was springtime then.

Ever since, the two sides have been struggling to retrieve the optimism and the trust that have eroded further every day.

On a scalding September morning 17 months later, there was another gathering in the same Baghdad square. Twelve mentally handicapped Iraqi children and teenagers stood chanting and singing in the shade of the statue's plinth. They carried signs handwritten in English that said, "Release our Friends and Do Not Prevent the Medicine". They were there to protest at the kidnapping of two Italian women who, until the previous day, regularly delivered medicine to their homes. Apart from the families of the children, and colleagues of the two women, both named Simona, the only onlookers at the demonstration were a handful of local journalists.

Beyond the tiny gathering the Baghdad traffic swirled and went on its way. Half a dozen moneychangers sat at tables by the kerb, stacks of nolonger new "Bremer" dinars in front of them. There were few pedestrians in the noon heat. The protest had been publicised in advance in the media. But nobody, not the drivers or the moneychangers or the pedestrians, took any notice of the children. Nobody honked a horn or called out from a window, or walked over to show support. As far as I could tell, nobody even looked at the protesters for more than a second or two.

Squatting in the thin shade of a thorny tree, a 60-year-old gardener called Othman seemed pained by it all. "It is terrible to kidnap humanitarian workers. These people didn't carry guns, they were helping our country. This is devastating to the reconstruction process. I wish they had kidnapped me instead."

So where is the public outrage? If Iraqis do not care to support the people who deliver their medicine and build their schools and bridges, what part of progress can they possibly care about? "We should all be in the streets, expressing our opinion," Othman says, sharing his decapitated Pepsi can of cool water. Othman makes $4 a day and is happy to have a job. But he would never travel to the square on his day off to protest for the rebuilding of his country. "No, no," he says. "We are too poor. We are too tired. If we work we can't come here, if we don't work we can't get here."

Across the street from Othman, 40 yards from the knot of children holding their signs, is the gate of the 14th Ramadan mosque. It is a biggish mosque, not important or monumental, but chunky enough and prosperous looking, with a wall around it and grass on either side of the deep forecourt. In front, above the broad steps and to the right of the main door, there are a couple of old sofas on a dirty carpet. The shade there is cool and, although this is a rebel mosque, and a Sunni one, it is a pleasant place to sit. The gunmen in front are bored and reasonably friendly and, during a brief visit, they do not seem too threatening. Beyond the gate the view is of the traffic, Ferdowsi Square, and the two towers of the city's Sheraton and Palestine hotels. A couple of 19-yearolds with their Kalashnikovs point out the places from which people fire Katyushas and rocket-propelled grenades at the hotels: "Over there from the bed of a Toyota... over here from the back of a donkey... a mortar from behind that tree below the steps."

It is as good a place as any to wonder how Iraqis can hope for reconstruction when the people who come there to help them are kidnapped. "We hate the occupation," says 19-year-old Ali. "They have given us nothing. After the Gulf War Saddam fixed the electricity within six months. Now it has been a year and a half and we see nothing. Even the appearance of good intentions would be good - just one school, one hospital."

The occupation has in fact built and renovated thousands of schools and hospitals. And the two kidnapped Italians are not the occupation. Indeed, like most NGO employees, they disliked the occupation. They were innocents. I point out that in Madrid, after the train bombings, hundreds of thousands of people gathered in the streets to protest at the killing of the innocent. And the people of Spain, of course, were also against the occupation in Iraq. "Yes," says Ali, "but Madrid happened in a stable country with stable police. What can we do here if we want a voice? Even the police are criminals. A few days ago the Americans came here and told us, 'Be careful, the Ba'athists are using police cars for car- bombs.' Yesterday there were gangs fighting behind the mosque for an hour and nobody came to stop them. Nowhere is safe. People are afraid to leave their homes - who wants to gather in the streets?"

The fall of Hussein has been celebrated by the ransacking of schools, hospitals, museums and government offices. Anti-occupation humanitarian aid workers are kidnapped. Thirty-five children are killed by suicide bombers at a celebration for a new sewage facility - and most quotes in the newspapers show the parents blaming American soldiers for suckering their kids with football and sweets. In the Baghdad slum of Sadr City, the latest uprising forces the cancellation of a $70m infrastructure programme designed to create 15,000 jobs and a variety of improved services. The Russian firm rebuilding a power plant outside Baghdad leaves Iraq, withdrawing almost 400 workers after the toll of its kidnapped employees reaches 40. Bombs threaten the January elections. Even the UN and the Red Cross are bombed.

Iraqis currently have the best constitution and the least despotic and most inclusive government in the Middle East - backed up by the full blessing of the UN. They will, should they choose to, have elections in three months' time. They are already participating in unprecedented levels of representative local government in growing pockets across the country. Their invasion was the most careful in the history of warfare. Even the worst motives ascribed to their occupier - greed for oil, a Zionist plot to transform the Middle East, megalomaniacal imperialism - argue for an occupation that would prefer to be nice on the ground. Thousands of aid workers and doctors and engineers and lorry drivers with spare parts are eager to come to their country and participate in renewal. Their own children are keen to play football and chase sweets - even if it means they have to hang out with GIs and attend the opening of sewage plants.

The occupation has, of course, made appalling mistakes. At the local level there have been the innumerable, avoidable, inevitable savageries of war. Visiting the Iraqi Hizbollah in a poor district of Baghdad, I once met two neighbourhood doctors who showed me around their clinic. They said it had recently been trashed by American soldiers. The place was a mess, with furniture upended, files emptied on the ground, doors broken. During the fighting in Sadr City I have seen Iraqi children with severed arteries, severed genitals, liquefied intestines. The father of one such boy once told me, "This fighting today is just practice. In five years this child will take revenge for himself." The child was six.

There have also been devastating mistakes at the other end of the scale, on the levels of culture, psychology and strategy. America's Palestine policy ensures that Iraqis simply cannot believe it when they are told that the occupation sincerely wants to help. And it should probably have been foreseen that, after 35 years under the Ba'ath Party, Iraqis would see all power, any manifestation of the state, as the enemy.

Occupation can be hell, especially psychologically. But isn't suicide worse? Have Iraqis gone insane? Or is there something rational behind the self-directed bloodletting?

There is no doubt that occupations of conquered, hostile countries can work. Germany and Japan had been flattened by 1945, after wars far longer and far more hateful than the invasion of Iraq. The 7,350 accidental Iraqi civilian deaths during the 2003 invasion were a terrible tragedy. But in 1945 America killed 140,000 civilians intentionally in a few seconds at Hiroshima. Before Churchill vaporised the undefended sanctuary city of Dresden in the same year, he asked around for "suggestions on how to blaze 600,000 refugees". There had been far more venom in those two wars, far more propaganda, far more bloodshed.

Meanwhile Japan and Germany today seem so naturally inclined in Washington's direction that it is easy to forget that in 1945 communism and the Third Way were serious threats to pull them out of the Anglo- Saxon orbit.

Arthur Schlesinger, author of a 1951 study of General MacArthur's Japanese vice-royalty, and now one of America's leading historians, recently reminded me that communism in the late 1940s was very like a "secular religion", begging at least a partial comparison to radical Islam in Iraq.

Meanwhile Japan and Germany today seem so naturally inclined in Washington's direction that it is easy to forget that in 1945 communism and the Third Way were serious threats to pull them out of the Anglo- Saxon orbit. Arthur Schlesinger, author of a 1951 study of General MacArthur's Japanese vice-royalty, and now one of America's leading historians, recently reminded me that communism in the late 1940s was very like a "secular religion", begging at least a partial comparison to radical Islam in Iraq.

In New York during the recent negotiations for the latest Shia ceasefire in Baghdad, Schlesinger outlined for me his four criteria for the successful occupation and rehabilitation of a defeated country: a homogeneous occupied nation; a culture of order and of respect for central government in the occupied country; a staggering military defeat accompanied by a formal and public surrender (to legitimize the new power in the eyes of the occupied people); and the absence of religious fanaticism.

Iraq, needless to say, does not look promising by these standards. It is riven by ethnic and sectarian differences. Its people have never looked with willing deference to their central government, and the country lacks any equivalent of what Schlesinger calls "the authority of the Japanese emperor", who gave the American occupation his blessing, or "the bureaucratic texture of the German people". There was no Iraqi surrender to the coalition. And religious fanaticism is rife in Iraq.

There are many other hugely important differences between these two successful occupations and Iraq. Japan and Germany in 1945 had memories of advanced and quasi-capitalist economies. Japan had the benefit of General MacArthur, a serious orientalist of 50 years' standing whose charisma answered the Japanese need for something to believe in after the simultaneous collapse of their empire, their religion and their state. In Germany the allies had an important degree of cultural understanding, with tens of thousands of German speakers among their ranks during the reconstruction. Japan did not have poisonous neighbours desperate to doom what MacArthur, like a good neo-con, called "an experiment in the liberation of a people".

Germany had to wait nine years for sovereignty, and our soldiers are still there. Iraq will get its first elections 20 months into the occupation, the same as Japan and three years faster than Germany. Marshall Plan money was not appropriated by Congress until three years after VE Day, whereas the $18.4bn Iraq Relief and Reconstruction Fund was voted through within five months of the end of the Iraq invasion.

And yet I cannot find records of a single allied soldier being killed in Japan or Germany in a political act during either country's occupation - despite all the hatred, despite what must seem by Iraq's standards the slowness of so many key benchmarks of progress and, in Japan's case, despite the cultural differences.

Schlesinger's last three criteria are basically about law and order and the practicability of the physical project of occupation. His first one - the necessity of a homogeneous nation - is more fundamental. "When I was working in Germany in 1945," he says, "I had a sense that Germans wanted Germany to work." This point goes to the heart of the key problem. Many Iraqis simply do not want Iraq to work - at least not as the country envisioned by the occupation, the UN and the majority of Iraqis. There are, broadly speaking, two kinds of political violence in Iraq: violence against the occupation and violence against the reconstruction. Violence against the reconstruction is almost exclusively a Sunni phenomenon. Both Shias and Sunnis want the Americans out but, whereas the Shia majority expects to win from a stable democratic outcome, the Sunni minority expects to lose.

Between ceasefires, the Shia insurgency fights the occupation in pitched battles in Najaf, all-night firefights in Sadr City and ambushes in Basra. The Sunnis, on the other hand, pursue objectives that are more psychological than tactical. Car bombs in crowded streets, suicide bombings, televised beheadings, the excruciating stop and start, hot and cold public tango of a long hostage negotiation: Sunni violence is usually the violence of spectacle. It is all about conveying a message.

And what is the message? Look at the victims - aid workers, police cadets, children, administrators - and it becomes clear. Don't rebuild the country. Don't police our streets. And, come January, don't go near that voting booth. With elections in sight, order today means democracy tomorrow. And, in a region where all politics are identity-based, that scares Sunni Iraq's Ba'athist and fundamentalist minorities-within- aminority. For the same reason, sabotage of oil pipelines and of other pillars of the reconstruction effort tends also to be a Sunni phenomenon. As with kidnappings, in the rare event of a Shia attack on physical infrastructure, disapproval from Moqtada al Sadr's camp tends to be quick and conclusive.

For the most extreme thugs everywhere, order of any kind is unwelcome, unless, of course, it is an order they dominate. Iraq's Ba'athists would enjoy a return to the old days, Saddam-style, and Sunni fundamentalists would love a Taliban-type arrangement. As neither of these is going to happen unless Iraq splits up, chaos is their goal - and if it leads to fraction so much the better.

For more moderate Iraqi Sunnis, a democratic outcome that kept Iraq whole should in theory make enough sense to make the reconstruction worth supporting. A Sunni-stan flying solo would quickly be dominated by the most violent Sunnis, whereas the sort of government and constitution that make a unified country possible would provide a barrier to rule by the Ba'athist or Salafi fringes. Without outside help such a barrier would initially be flimsy. But external help will be there, and for Sunnis who don't want to go back to Hussein's days or forward to a Mullah Omar utopia, a central government backed by the enemies of their enemies would be better than no barrier at all.

So, once again, where is the silent majority? Where are the Sunnis who should be trying to encourage the only outcome that can save them from their own worst elements? The answer is they are intimidated. And, like Othman the Ferdowsi Square gardener, and 25 million other Iraqis who don't have a public word to say in support of their own reconstruction, they are demoralised by 35 hellish years under the Ba'ath party.

But there is more to it. While extremists can prosper only in a state of disorder or disunion, moderate Sunnis are scared of the Shia rule that democracy will inevitably bring. They do not trust democracy. In fact, they fear it. The word and the concept itself have been framed in Iraq in a way that makes it impossible for the Sunnis to accept. "Democracy" in our parlance is in fact a short- hand term, a piece of slang almost. What we really mean by it is something like "liberal, constitutional democracy". We mean universal suffrage, of course, and great power for the majority. But we also mean that, ultimately, it is the law rather than the majority that rules. And we mean that there is a constitution that protects this law from being yoked into the service of tyranny.

None of this has been explained to Iraqis - especially the Sunnis. They have a shiny new interim constitution that includes every guarantee an enlightened committee could ever think of. This transitional law will play a major role as a basis for the permanent constitution and the Sunnis, like the Kurds and the Shias, will have a veto over the final document. If the occupation and the Iraqi government were cleverer, Sunni "buy-in" would be avidly courted. The current constitutional guarantees of federalism and minority rights, the veto each big group possesses, the involvement of the UN - all of this should be widely sold to the Sunnis. The Baghdad government should be doing it. The UN and the occupation should be doing it. Fortunately, the Shias have already started doing it, behind the scenes.

The Shia politician Ahmed Chalabi recently arranged for Moqtada al Sadr's top lieutenant to visit the Kurds on just such a mission and, since then, Moqtada's camp has also begun quietly reaching out to what little Sunni leadership exists.

It has been interesting to watch Chalabi playing Aristotle to Moqtada's Alexander. The former's quiet comeback and the latter's entry into the Iraqi political process will be the two most important developments in Iraqi politics this autumn - these two are the best hope for soothing the basic Sunni fear of democracy.

In a July opinion poll, 39 per cent of Iraqis said they thought their country was "heading in the wrong direction"; 62 per cent of that minority blamed the "security situation", versus 17 per cent who blamed the "presence of occupation forces". Iraqi violence is Iraq's main problem, and Iraqis know it. It is Sunni fear that is fuelling Iraq's flames, and only the Shias can allay it.