On the floor above the room in the hotel in Baghdad where I live is the office of Rory Carroll, the Guardian correspondent. Kidnapped by gunmen last Wednesday, he was happily released 36 hours later in a blaze of publicity.

Unknown to the outside world, a story without a happy ending happened the following day on the floor just below my room. This is the reception area of my block of the hotel where, behind a wooden counter, usually sits Abu Hussein, the friendly and efficient desk clerk.

His son had a business collecting money from shopkeepers for whom he would buy scratch cards for mobile phones from a Baghdad cell-phone company. He would get a small commission from the shopkeepers and the company selling the scratch cards.

Somebody must have tipped off a kidnap gang that last Thursday Abu Hussein's son would be carrying upwards of $50,000 in cash to the phone company. He was abducted by two carloads of gunmen. At first they demanded a ransom, but he told them they had just stolen all his money. The kidnappers let him phone his father, adding that he would be released the following day in a certain square in Baghdad.

Abu Hussein went to pick him up. He saw a car draw up and his son get out of it and take several steps towards him. Then the kidnappers fired a burst of shots into his son's back and he fell down dead.

Iraq is full of such stories of cruelty and blood. It is not true when George Bush, Tony Blair and Jack Straw say that things are improving. They are getting worse by the day. It was announced yesterday that Iraqis had voted in favour of the new constitution. No doubt this will be lauded in Washington and London as an encouraging glimmer of light at the end of the tunnel.

But viewed from Baghdad, there is something absurd about the idea that a new constitution - the rules of the game under which the state will be governed - should be taken so seriously abroad when nobody in Iraq obeys the law and in any case there is no state.

Iraq is full of phoney milestones. The US government is congratulating itself this week on training 200,000 army, police and paramilitary forces. But half of the 80,000-strong Iraqi army consists of "ghost" battalions in which commanders pocket the salaries of non-existent troops.

Power is wholly fragmented. Each ministry is the stronghold of one or another party. Every time a new minister takes over, he fires the acolytes of his predecessor and hires his own supporters. Even inside ministries, power is divided again. Within the powerful Interior Ministry, for instance, the director generals of each section act as independent warlords.

Iraqis increasingly see the government as one more bandit gang trying to gouge money out of them. Private kidnap gangs have already forced much of the Iraqi middle class to flee to Jordan, Syria and Egypt. But now there is "official kidnapping", whereby a man is arrested and accused of support for the insurgents. Quite soon it is suggested to him that the only way he can get out of jail is to pay a large sum. One friend sold his house and paid $120,000 to his captors, who promptly arrested his son and demanded the same sum for his release.

The extent of the anarchy may not be evident to American, British and Iraqi officials living in the heavily fortified Green Zone. It is a separate planet. I asked one Iraqi friend who lives there if he thought American officials knew anything of Iraq. He replied derisively: "They don't even dare venture into most of the Green Zone." One Iraqi political leader claims "there are ministers in the government here who have never seen their own ministries because they never leave the zone."

The referendum on the constitution has deepened the division between Sunni Arabs, who voted "no", and the Shia and Kurds who voted "yes". There is no sign of insurgency ebbing as the number of American dead reaches the 2,000 mark.

Iraq is a society bleeding to death. I will be leaving the country for a time in the next few days. To do so I need an exit visa. In the past I was helped obtain one by a Lieutenant-Colonel Hussein, an intelligent man who had returned to Iraq after prolonged exile in Sweden.

I asked for him at his department this week. "Didn't you know he was killed a week ago?" replied an official. "He walked out of the door of his house in the morning and they shot him dead."