Manager did not create positive environment...
Shearer, who was in charge at Newcastle for the last few games of the 2008-09 season when the Toon were relegated, believes that Capello's players had little affection for or loyalty to their manager in South Africa.
"This is the worst thing you can say about any football manager, yet it needs saying: It looked to me as if the England players did not want to play for him," Shearer told The Sun.
"There was something fundamentally wrong inside that camp and only those who were there know the real problems and can tell the truth about what went on.
"From the outside, though, it looked as if the squad were locked away in a boot camp and let out only on match days.
"Once they were released, they looked ill-at-ease, under-prepared and totally confused.
"John Terry let the cat out of the bag when he made his comments after the Algeria game.
"Whether he was right to air his critical views in public is still open to debate. But at least he had the balls to come out and say things were not up to par.
"The rest of the squad did not back him in the end and that was their right. I could see the need to close ranks and present a united front before the Slovenia game."
Shearer wants to see an Englishman in charge of the national side again and insists that he is not being xenophobic in that assessment of the situation.
"I cannot be accused of being anti-foreigner just because Capello has failed to take us beyond the last 16," he fumed.
"I have said since the appointment of Sven Goran Eriksson that the England team needs an Englishman in charge.
"We have brought in overseas coaches with lots of the right qualifications and a long list of achievements at club level. But they have brought little to our national team.
"I still maintain we have enough players of quality to produce far, far more than we have done at these World Cup finals. So why did they fall short?"
Shearer does not think the fault lies with the players, who he claims continue to be driven by much more than just money.
"I know the players have to accept their share of the blame but I am not going along with the argument that they are overpaid and do not care enough because they live with their heads in the clouds and are too protected and pampered," he said.
"I do not care if a footballer is paid £1,000 or £100,000 a week. He wants to win, wants success on the field and needs to look back on his career with a cupboard full of medals to display.
"What he also needs is the right atmosphere and preparation to perform to his maximum and, for me, the current England team had neither of those."
Shearer also harked back to his own playing days, and pointed to Terry Venables as his ideal model of an England manager.
"Terry's knowledge and tactical know-how were spot-on and he knew how to get the best out of us too," he insisted.
"We responded to him, believed in him and played some outstanding football in that tournament [Euro '96]. The fact he was English was no coincidence.
"Glenn Hoddle had the same impact to a lesser extent. They both knew how to create a positive attitude and the right tactical framework.
"I have been looking at Argentina's performances and comparing them to ours. Unlike England, they struggled to qualify. But since arriving at the finals they have looked impressive.
"They have Diego Maradona in charge and, by all accounts, he is not exactly a tactical mastermind. What he does have, though, is a rapport with his players.
"They respect him and he looks as if he is one of them, enjoying and celebrating their victories with great passion.
"I do not think we have ever seen that with Capello and his players."