The crisis in Ukraine has revived memories of the cold war and sparked fears of a new one. But as vulnerable as the country looks – with Crimea annexed and Russian troops on its borders – many are equally discouraged by its economic fragility, including slow growth and a fiscal deficit exceeding 5 per cent of gross domestic product.

Yet Ukraine’s economic plight does not mean its economic future has to be bleak. Like Poland in 1989, it has great potential for improvement. And if it addresses its problems with the right reforms it can still release that potential as Poland did quarter of a century ago.

Since the collapse of communism, huge variations in long-term growth have appeared in the former Soviet block While Poland’s gross domestic product had doubled by 2013, that of Ukraine remains below its initial level. Institutional change, or the lack of it, is a key to this divergence. Poland and most other former Soviet countries swiftly restructured state machinery to enable the growth of dynamic, politically autonomous private companies in competitive domestic markets. By contrast in Ukraine, as in Russia, crony capitalism took hold. Politically connected businesspeople can use political patronage to take over the assets of less fortunate entrepreneurs while some politicians use their power to enrich themselves.