The 58-year-old believes the chances for domestic talent to flourish are being taken by foreign youngsters, a situation which he insists is detrimental to the national team.
"Eventually the England side will be very poor because there are not enough players from which to choose," the former Newcastle and Blackburn boss told reporters.
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|11/1||BetVictor offer 11/1 that Joe Cole will open the scoring when West Ham host Tottenham next week|
"We have to think British more, and be more selfish. Far too many are brought to Britain from abroad to take up academy places in this country.
"We say that we have to be fair to all. But if you go to Spain or Italy or Holland, you don't see that fairness in those countries."
West Ham boast an excellent track record of promoting young British talent, with England internationals such as Joe Cole, Glen Johnson, Jermain Defoe, Frank Lampard, Rio Ferdinand and Michael Carrick all having emerged from their ranks.
And Allardyce claimed all English clubs should have a similar philosophy, adding: "Every club's strategy should be to develop young players.
"The development of young players at West Ham has been an outstanding bonus to the club over many years."