At the Red Shoe men’s clothing shop, Ameen Ziwar, an Iraqi stockbroker, is trying on a pair of handmade Italian shoes. “I live in Cairo but frankly the quality and prices are much better in Baghdad,” he said as he moved on to a selection of imported belts, each costing the equivalent of several months’ wages for ordinary Iraqis.

Despite a decade of sanctions that has impoverished the middle classes and made the poor destitute, not everyone has suffered. Sanctions busters and smugglers have grown fat during the embargo.

While luxury cars and expensive clothes are relatively easy to spot, the real sign of wealth is the construction boom across the city. Encouraged by a period of relative stability and the return to Baghdad of many foreigners, businessmen are putting their profits into lavish villas and mini-palaces that have sprung up in the smarter districts.

In Mansour, traditionally a popular area for foreign diplomats, the noise of construction is continuous as hundreds of workers labour to finish the marble and glass homes favoured by the rich. Whatever its size, no home is complete without Roman columns and as many garages as the property can accommodate. One of the richest families in Baghdad is building a house that is thought will have parking space for 18 cars.

In addition, no member of this elite group will be taken seriously unless they also have a private pool. That means going to see Khalil al-Gailani, who runs the Baghdad Swimming Pools company.

“There is no point in spending millions on a new home if you have not bothered to install a pool,” he said. Mr al-Gailani has built four new pools and completed 15 others this year, with a starting price of about £6,500.

This ostentation, however, is causing growing resentment among most Iraqis, who are struggling to feed and clothe their families. One civil servant said: “It makes me sick. These people got rich at our expense. Many of them live in Beirut or London. They do not even know what we have been through.”

This man’s salary before the Gulf War was about £500 a month, enough to feed his family, buy a car, go abroad and even put some money aside. Today he receives about £3.25 a month and has to live off food subsidised by the Government. “If we want to buy a new television set or furniture we have to sell something else to pay for it,” he said.

His remarks were confirmed by a visit to the city’s main antiques market, where stalls are groaning with silverware, jewellery, and Persian carpets. “There is a huge amount on the market,” Mohammed al-Finjan, an antiques dealer, said. “Some things people will never part with for personal reasons but everything else is being sold off so that families can survive.”

The impoverishment of the middle class is nothing compared with the plight of the poor, who are often reduced to begging on the streets. In the provinces, Iraqis say, the situation is worse.

In most countries the authorities might be worried that such stark social inequities could spark dissent. But Saddam Hussein’s hold on power seems as strong as ever, in no small part because of the ruthless secret police, which crushes any sign of opposition.

Also, it would be the height of hypocrisy for him to stop the rich building their lavish villas. During the past decade he has ordered the construction of several palaces, one of them a sprawling complex near the city’s airport.

”It would take you about three hours to drive around that property,” grumbled one Baghdadi. “I live in a three-room flat with my wife and six children.”