Past readings, for example Richard Zacks' The Pirate Coast, describe Islamic city-states along the Mediterranean, decadent hereditary princes ruling a city and its environs predominantly autonomously - tributaries of the Ottoman sultans only in a loose financial and ceremonial sense. Were city-states also the norm in medieval/Islamic Golden Age Mesopotamia and "northern Iraq?" largely autonomous tributaries of the Caliph? If the cultural background of the region leans toward local leaders and relatively independent cities, it's easier to understand why Western imperial planning, and its presumption of the post-Westphalia nation-state as the only way, has failed so badly!
What books are good for learning about the Middle Ages cities of what-is-now-Iraq?
For a good eyewitness account of medieval cities in what is now Iraq, you should consult The Adventures of Ibn Battuta by Ross E. Dunn. Ibn Battuta went on the hajj pilgrimage to Mecca in the early 14th century and travelled throughout the Middle East for 30 years while writing about his experiences. Included in his writings are accounts of Baghdad, Basra and other cities that would greatly interest you. This companion is much easier to read than the original text and discusses the most important portions while adding vital historical context.
On a more macro, theoretical level, The Muqaddimah by Ibn Khaldun gives a broad theory of political power and the rise and fall of kingdoms in the medieval Middle East. The original is a dense multi-volume work so I preferred the abridged version by Franz Rosenthal and N.J. Dawood. Ibn Khaldun claims that power in the medieval Islamic world was cyclical, with nomadic warriors displacing sedentary kingdoms, then in turn being displaced after growing complacent and lazy with an urban lifestyle.
From reading these texts and others, my sense is that day-to-day governance was localized due to the limitations of technology and geography. Caliphs and later sultans who ruled what is now Iraq demanded taxes and at least feigned loyalty to their rule but allowed relative autonomy for the simple reason that bureaucrats in Istanbul couldn't effectively run affairs in Iraq using medieval communication and transportation technology. For most of history, caliphs were also figureheads and nominal spiritual leaders of the Muslim world and actual power was held by their military commanders.
European failure had less to do with a fundamental difference in views on governance and more to do with a lack of long-term planning. The British and French created frankenstein states comprised of arbitrarily-drawn borders that failed to take demographics and geography into account. Europeans elevated minorities like the Sunnis in Iraq and Alawites in Syria, leaving them control of government and the military when they left. The result was a patchwork of authoritarian governments with an incentive to repress other ethnic groups to retain control.