The Liverpool boss believes young players require competitive matches to flourish, and wants the English FA to allow top clubs to be allowed to field reserve teams in the lower divisions.
"It is clear that the reserve system doesn't work," he said. "The reserve league is nothing.
"You can see youngsters playing just 18 games a season. That is nothing - certainly not enough for the development of these players.
"It is something that we can improve in this country, or if we do not change, we will find other solutions: sending youngsters out on loan, like I have done recently.
"I do not want to see reserve teams with four or five senior men playing without passion. These games are for young players."
He also does not feel it is of particular benefit to the players to be part of the first-team squad unless they can play first-team football.
"Between 18 and 21 years old in this country, the players do not know what to do. If they are good enough at 18, they are with the first team but on the bench all the time."
While learning his trade, Benitez worked as manager of Real Madrid's reserve team, Castilla, in the Spanish Segunda Division.
"I had players who were 18-19 years old playing in the Spanish second division championship.
"They were playing against men. They were winning and we finished sixth and fourth. The question is: what improves the quality of the players?
"You cannot play in a reserve league with players who are 34 years old and coming back from injury. They don't work hard.
"I would like to see reserve teams of the big clubs like ourselves playing in the Football League. Why not if they have enough quality?
"The key is that the young players may have quality, but not the experience for the first team. They are only on the bench. That will bridge the gap between the youngsters and the first team.
"If you do not give young players the chance to play competitive football and to learn things, things become impossible."
He added: "I am not too sure about them playing in League Two, either. They need really to be playing against good players, then they will learn more."