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Snowball represents Leon Trotsky, the military genius who helped make the Soviet Union a strong world power in the early days of the Russian Revolution. However, Joseph Stalin (Napoleon), jealous of Trotsky's intellect and wanting power for himself, had Trotsky banished, and afterwards used him as a scapegoat for any failures in the system:
"Snowball has done this thing! In sheer malignity, thinking to set back our plans and avenge himself for his ignominious expulsion, this traitor has crept here under cover of night and destroyed our work of nearly a year."
(Orwell, Animal Farm, msxnet.org)
Since he was gone, Trotsky was unable to sabotage any of Stalin's plans, but like Napoleon, Stalin knew the value of a false, subversive enemy. By portraying Trotsky as a hidden force trying to undermine him, Stalin excused his use of secret police and murder to quell sedition. Similarly, Napoleon uses Snowball as an excuse for all of his failures, pretending that Snowball is remaining in the area to perform acts of sabotage. This shows a powerful method of propaganda, as Squealer and Napoleon tell unashamed lies to cover up for their power-grabs and alterations of the original, Marxist (Old Major's) ideals.
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