Look at the successful football nations: Spain, Brazil, Germany. Compare their top leagues to ours, the premier league is so much richer than their leagues it is ridiculous, and this causes problems. Anyone who has played manager mode on FIFA will probably have neglected to promote youth players to their team because it takes 7 or 8 seasons for them to reach their potential, possibly more. That is exactly the same in the premier league, even the small clubs can afford to spend millions on a star signing, why take the gamble on an unproven youth player when you can just buy this proven player from the Dutch league?
Most of Spain's top clubs are in debt, which means that they can't afford to buy top quality players, they have to produce their own, so they give their local striker a place in the first team to cut costs and give him everything he needs to develop because it is cheaper than paying millions on a developed player. The first season or so he won't impress but with few other options the club continues with him and eventually he starts to prove himself and becomes a top quality striker. Unrealistic? Think about when Drogba started to become a world class striker, he was pretty old. In England if you can't cut it by the time you're 21 in the premier league then you're out the door, they can afford to buy a better replacement anyway. That isn't how football development works though, to make them world class you have to expose them to the top league week upon week, no English team will do that.
Even the youngsters that do come through the youth system tend to have been purchased from another club, which means the local Englishmen that could have been promoted to the first team are shunted out by whoever looks like they will be able to perform in the premier league at a younger age.
Look at Athletic Bilbao, they refuse to sign a player who doesn't live in their area of the country, yet they qualified for the Champions League this season, that is a team full of potential national players there, Bilbao has relied on scouting the local area for potential talent and putting faith in them to gradually develop into top players, there is no way that would happen in the premier league, risking kids will mean poorer results in the short term, which means you get sacked. So managers just go to another country and buy someone that has put the years in at their local club to become a talented player, because they will adapt to the premier league faster than a local youth player because they are already the finished product.
The problem is there is too much money in the game, the lower league clubs can't afford relegation so they have to spend big to stay up, there is no room for the long term plan when the financial implications of relegation are so large. The same goes for the top of the table, why develop youth when your opponents will be buying the best players from other countries? There's no way you'll win the league if you try it, so nobody does and nobody ever will.
Unless the premier league stops its buying culture local players will never be gambled on and we will never compete for international silverware again.