The manager argued that current in-fighting between the Football Association and the Premier League was holding the national side back in the cradle of the game.
The Swede was speaking after he and four other former England bosses backed FA chairman Greg Dyke's plan to force English clubs to give homegrown talent more opportunities.
The proposal to raise clubs' minimum number of domestic players from eight to 12 could put the FA at loggerheads with Premier League clubs, with Arsenal manager Arsene Wenger – the first top flight boss to field an all-foreign 16-strong matchday squad in England – recently voicing his opposition.
The focus on Dyke's long-running attempts to overhaul the English game increased after the national team's dismal showing at last year's World Cup, crashing out early after losing their opening two group games.
"I think the chances to reach a final in the World Cup is much bigger if you make some restrictions on taking foreigners," Eriksson told AFP in Shanghai, where he is coaching current Chinese Super League leaders Shanghai SIPG.
Opposition to the plan was primarily financially driven, he said. "It is cheaper to buy a player from Sweden, from Norway, from wherever it is, than to buy one from another club in England.
"It is the FA on one side and the Premier League on the other. It is a fight, and it has been going on all the time."
Eriksson also said England's chances of success would improve if the Premier League introduced a winter break – an idea he touted when he was the national coach between 2001 and 2006.
"But (England) is still debating about it," he bemoaned. "Once again – FA control, Premier League?"
In the Chinese Super League, clubs are permitted five overseas players with only four, including one from another Asian country, allowed in matchday squads. Eriksson's Shanghai SIPG squad includes Argentine star Dario Conca, Brazilian Davi and Swede Tobias Hysen.
The well-travelled Swede took England to the quarter-finals at the 2002 and 2006 World Cups, being eliminated by eventual winners Brazil in the Japan-South Korea tournament and losing on penalties to Portugal in Germany four years later.
He went on to manage Premier League side Manchester City in 2007, but was sacked months before the club's takeover by the Abu Dhabi United Group in 2008.
The side's current manager, Chilean Manuel Pellegrini, who guided City to the league title last year, is currently under fire with his team in fourth place with five games of the season left.
Eriksson said slipping out of the lucrative Champions League slots at the top of the table would be an unthinkable prospect for the owners who have pumped millions into the team.
"I am sure they are not happy, not happy at all," Eriksson said. "And who is going to pay the price, as usual, the manager.
"I do not know if they are going to change or not, but I would not be surprised," he said.
"Nobody would be surprised because if you invest so much money they expect to fight for the title in England and expect to go a very long way in the Champions League and unfortunately, this season they haven't done that so we will see what happens."