This statement not only foreshadows Snowball's demonization but also predicts Napoleon's tyrannical rule which is vested in brutality, manipulation, exploitation, abuse and propaganda.
With Snowball out of the way, Napoleon can achieve sole leadership of the farm without being contested. Snowball had been a thorn in Napoleon's side. The two could never agree on anything and were consistently at loggerheads during meetings. Furthermore, Snowball had made a greater impression on the other animals especially with his plans for the erection of a windmill. He had also worked very hard at establishing committees and educating the animals. In essence, Snowball was working towards a greater good, whereas the sly Napoleon had only his own interests at heart. This was most aptly illustrated by his removal of Bluebell and Jessie's pups soon after they had weaned. He kept them in hiding and later used them to brutalise and execute any animal that dared oppose him.
Snowball became the scapegoat for everything that went wrong on the farm. It was put out, for example, that he had been in cahoots with Jones from the very beginning. After his expulsion, it was also said that he had surreptitiously been visiting the farm, destroying all the animals' hard work. Napoleon even went as far as sniffing out his scent and indicating signs of his so-called secret visitations. Snowball was thoroughly demonized through a process of propaganda and misinformation.
In pursuing this deceitful tactic, Napoleon had cleverly destroyed the animals' faith in Snowball and what he had stood for. By offering rewards for Snowball's capture and pronouncing a death sentence upon him, he created the illusion that he had all the animals best interests at heart. Although some animals had expressed misgivings about what they were told, the propaganda was so convincing that the unintelligent animals were easily swayed.
In addition, demonising Snowball and making him the enemy ensured that Napoleon could also purge the farm of all those who stood against him. So it was with the hens who refused to lay eggs for sale and a number of other animals who confessed to having secretly assisted Snowball. They were all executed when the dogs tore out their throats at Napoleon's instruction. This brutal act drove fear into the animals and they meekly and unquestioningly followed instructions.
Napoleon later assumed total control of the farm and was referred to as 'Our Leader, comrade Napoleon.' He and the other pigs practised human vices such as drinking alcohol and they became more human in their actions and demeanour. The pigs adopted a supercilious attitude and changed the commandments to suit them. Although there were murmurs of discontent at each alteration, these were soon suppressed by propaganda and lies as well as the threat of Jones coming back. it is no wonder then that the animals were even more enslaved, abused and exploited than in Jones' time.
A further point for consideration is the fact that the statement, 'Snowball's heroism is much exaggerated' also alludes to the animals own heroic attempts at achieving utopia. The grand purpose of their attempts was much exaggerated since their efforts ended in utter failure. They had not achieved their ideal and instead replaced one tyrant with another. Worse, still, is the fact that their new master was one of their own. Their current oppressor could not care less about their situation and used them to ensure privilege for himself and his own breed. Napoleon and the pigs lived lives of luxury and privilege, whilst the other animals suffered.
Tragically, life on the farm had gone full circle and the majority of the animals found themselves in an even worse situation than they had been under Mr Jones' rule.
Squealer's assertion that Snowball's claims of heroism are "much exaggerated" foreshadows the way Snowball will be demonized throughout the rest of the novel and used as a scapegoat—or scape pig—every time something goes wrong at Animal Farm. Truth has become elastic and will now change almost moment by moment to agree with whatever suits the interests of Napoleon and the other pigs.
Further, it foreshadows how the pigs will use fear to control and manipulate the other animals. Right after he makes his statement (or, more accurately, tells his lie) about Snowball's overrated heroism, Squealer states:
Discipline, comrades, iron discipline! That is the watchword for today. One false step, and our enemies would be upon us. Surely, comrades, you do not want Jones back?"
Squealer diverts attention from Snowball before the truth about his heroism can be examined by encouraging fear of enemies such as Jones. This kind of propaganda will make it increasingly difficult for the other animals to discern truth from falsehood. It is part of the death knell of their dreams of a utopian society based on equality and mutual respect.
In Chapter Five, Squealer claims that Snowball's heroism is "much exaggerated." Squealer does this to blacken Snowball's reputation after he is driven from the farm by Napoleon, but it is also significant because it foreshadows a number of other events in the story.
First of all, it foreshadows the blaming of Snowball for the destruction of the windmill in Chapter Six. Even though the windmill is destroyed by bad weather, Napoleon instantly blames Snowball and uses this as an opportunity to sentence him to death.
Secondly, it foreshadows the murder of the pigs and the hens in Chapter Eight. In order to justify these extreme acts of violence, for instance, Napoleon accuses these animals of being Snowball's "secret agents," a move which further cements Napoleon's dominance while ensuring that the animals are too afraid to defy him.
The animals saw Snowball's heroism for themselves. However, after Snowball is expelled, Squealer tries to tell them that Snowball was really not a hero afterall. This foreshadows the rewriting of other history that will take place during the rest of the story. It also foreshadows the rewriting of the original commandments given written by Snowball and Napoleon. Once Snowball is gone, Napoleon is free to rewrite both the commandments and history according to his point of view. This parallels the rewriting of history that took place during the rule of Stalin in the Soviet Union.
With Squealer, Orwell is foreshadowing that eventually anything and everything will blamed on Snowball. Squealer apparently realizes that the animals have short memories and often question their own memory when they are told differently. At the point where Squealer states that Snowball's heroism will come to be seen as exagerrated, he knows that he cannot say a lot at that moment because the animals remember seeing Snowball grazed by the gun shot by the farmer. While he cannot erase that memory, he knows that time is on his side and that he will eventually be able to get the animals to see history the way he wants them to see it.