Baghdad ? Strolling down Airplane Road in the Dora district, it’s clear what has happened in Iraq during the last year. A former war zone has become a place where shops and schools are open and housing prices are rising.

The strategy of “surging” 30,000 American soldiers into Iraq and stationing many of them outside of giant U.S. bases has made a crucial difference. Like Gen. Matthew Ridgeway in Korea, Gen. David Petraeus has rescued a failing war effort. He applied the classic counterinsurgency tactic of protecting the population. The people, in turn, provided information about the terrorists hiding in their midst.

A staggered al-Qaida is steadily losing one redoubt after another because, in the most important shift in the war, the Sunni people turned against the terrorists and aligned with American soldiers. More than 80,000 men (mainly Sunnis) have joined neighborhood watch groups that the U.S. calls Concerned Local Citizens. Essential in last year’s battles to drive al-Qaida out of Baghdad, the CLCs also provide Sunnis with a defense against Shiite militias.

Now, victory is within our grasp – if only the Iraqi government could effectively reach out to Sunnis and Shiites alike who are fed up with violence and sectarian divisions.

Yet, the perverse political system stymies such an outcome.

In 2004, U.S. and U.N. officials pushed through an electoral process that resulted in votes for parties rather than individual candidates. This left party bosses in Baghdad free to appoint hacks who do not answer to any local constituency and face no penalty for failing to provide essential services. Water, electricity, garbage collection and job creation are in terrible shape, especially in Sunni areas, because the government is run by Shiites.

American battalion commanders have stepped in. Officers trained to attack cities, not run them, have temporarily assumed the duties of city managers, cadging resources and hounding Iraqi officials to disburse hoarded funds.

This situation cannot last indefinitely. American officers cannot take the place of the missing government of Iraq. The CLCs must be incorporated into the police. But the government headed by Nouri al-Maliki is moving with agonizing slowness, running the risk that civil war may be reignited.

The danger grows because the five surge brigades – fully one-quarter of American combat power – are scheduled to return home by August. Coincidentally, thousands of former insurgents will be released from American-run prisons. In Baghdad alone, more than 30 detainees a day are expected to return at a time when there are substantially fewer American soldiers on the streets.

Meanwhile, American and Iraqi units still have to drive al-Qaida from Mosul and the desert close to the border with Syria, which remains a sanctuary for extremists. Iran also continues to train and fund Shiite extremist gangs. So Petraeus has his hands full. His task will become more difficult if shortsighted officials in Washington push for even more troop reductions later this year.

However, it is the government’s ineffectiveness, not the insurgency, that is Iraq’s biggest problem. Al-Maliki has antagonized the Kurds, Sunnis and many of the Shiite parties. In no small part, his conduct stems from a perception that President Bush’s support is assured. Bush goes out of his way to support the embattled prime minister, whether in news conferences or in their regular video teleconferences.

Believing that the White House cannot effectively pressure him without undermining domestic support for its Iraq policy, al-Maliki has slighted governance while consolidating sectarian control via a vulpine clique. In a flight from reality, his aides balked over sending a letter to the U.N. requesting that coalition forces remain in Iraq, even though al-Maliki wouldn’t last a day without coalition support. There are good reasons for the administration to be reluctant to ditch the prime minister when no consensus candidate has emerged to replace him. If the opposition toppled the government and it took months to choose a successor (as happened in 2006 when al-Maliki replaced Ibrahim al-Jaafari), the fragile security conditions might not withstand the paralysis of an already sclerotic government.

But Bush should not repeat in Iraq the mistake he has already made in Russia and Pakistan: overly personalizing relations with another country. The U.S. should support democracy in Iraq, not al-Maliki per se.

A few weeks ago, the Kurds threatened a “no-confidence” vote if the prime minister did not share power. Chastened, al-Maliki seemed to agree. The tests will be whether he permits Sunnis to join the police force in representative numbers, disburses funds to the provinces and permits legislation for provincial elections certain to weaken his authoritarian efforts to control Iraq.

If he doesn’t come through, the American president may have no choice but to cast his vote – probably a decisive one – against the Iraqi prime minister.