Trotsky set out the difference between the revolutionary approach of permanent revolution, and the bourgeois reformist approach of the stages theory that is again seen, today. Lenin pointed out that reforms are steps on the path to a revolutionary break, but this doesn't reveal the different mindset the revolutionary has to such a process, compared to the reformist. In part, the concept of transitional demands explains that difference, but, taken out of context, transitional demands become either just another set of reforms, utopian, revolutionary phrase-mongering, or some kind of means of tricking the workers. The difference is better summed up in the way the revolutionary posits the purpose of reforms, and the means by which they are to be won. Trotsky's Action Programme For France is a good example of that.
The Stalinists argued against Trotsky's position, in relation to China, by saying that it implied the country was on the verge of achieving The Dictatorship of the Proletariat. For the Stalinists, and the Menshevik stages theory, that was something much further into the future, after China had passed through a lengthy period of capitalist development, and bourgeois-democracy. Here, we have to make an important distinction between a proletarian revolution, and a socialist revolution, and between a workers' state, and a socialist state, which goes to the heart of the divide between permanent revolution and socialism in one country.
Marxist theory explains that socialism in one country is impossible. Indeed, capitalism in one country is impossible. Marx set out that primary capital accumulation only occurred because of an expansion of international trade, including the slave trade, development of colonies and so on. Capitalist machine production requires, not just national, but global markets. Socialism is only possible on the basis of the development of the productive forces that this developed, global capitalism establishes.
In Marx's Letter to Zasulich, and Engels' Letter to Danielson, they set out that Russia could “theoretically” by-pass the stage of capitalist development, but only on the basis of socialist revolutions in the advanced economies of Western Europe. As Engels put it that would provide both the model and the technology that Russia would require. However, Engels points out that no such revolution had occurred, and so the point was moot. As Plekhanov put it, asking whether capitalism in Russia was inevitable was the wrong question. It already had developed, and was continuing to develop at a pace.
That part of the issue was resolved for China, because proletarian revolution had already occurred in the USSR, providing, at least, the model, if not the advanced technology that China would require for a socialist transformation. But, that leaves the other question, which is that Marxist theory requires that, for socialism, the productive forces must be sufficiently developed, and, in Russia, in 1917, and, in China, in 1925, they were not.
Herein lies the crux of the debate between permanent revolution and socialism in once country. The perspective laid out by Lenin and Trotsky, in 1917, was that it was not possible to build socialism in Russia, and yet the workers were leading the revolution, which was a bourgeois revolution, and were dragging behind them a large peasant mass, engaged in a Peasant War. In other words, building socialism was not possible, but a proletarian revolution was taking place anyway, and, it was not possible to artificially limit or stop that process simply at the stage of a bourgeois-democratic revolution. To try to do so, as the Mensheviks did, would lead to the workers abandoning them, and turning against them, and, as happened in 1848, a reactionary, counter-revolution taking place.
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