Celtic fan I work with says the rot started with Souness at Rangers in the 80s.
They were an attractive prospect as they had loads of money and European football (which English clubs did not have), so lots of top English players went there.
He thinks that lots of the other clubs saw their success and tried to follow the lead, so rather than invest in young local talent, and the means required to develop it, clubs invested in bringing in players from elsewhere. As well as hurting the number of good players coming through, it also meant that good players would move out of Scotland, rather than develop locally.
So short-termism, essentially (bane of the modern world).