Leeds are currently enduring yet more turmoil off the pitch, with Massimo Cellino's takeover of the club blocked by the Football League, but Blackwell says the problems began back when the club were still in the Premier League.
He told the new FL72 Weekly Show on Sky Sports News Radio: "The first time when I went to Leeds was with Peter Reid and shortly after I arrived it was announced the club was £110million in debt.
"I remember we were playing Manchester United at Elland Road and it broke on Sky Sports News that the accounts had been published and Leeds were £110million in debt.
"They brought Trevor Birch in who was effectively a forensic accountant and every fortnight on a Thursday we would know about 2 o'clock whether the City of London, because we were a plc, would give us the OK to carry on for another two weeks. It was energy and morale-sapping."
Although the problems at Leeds are long-standing, Blackwell believes they could have been resolved by now with the right owners.
He said: "The money that was borrowed by Leeds United in 2000 and 2001 was really the catalyst as to why they are where they are now, but subsequent owners, the people that Trevor Birch sold the club to, they were not really football people.
"That's one of the biggest problems in the game at the moment, the people that are coming in aren't being vetted properly and do not understand how the game is run.
"When the new guys came in at Leeds, and at Luton, they could not believe how the football world worked, and then effectively put the club into administration.
"If I was to walk into an engineering company and say 'you've been making those wheels like that for the last 100 years but now we're going to make square wheels because that's what I think we should be doing', we'd soon go bust.
"That's exactly what's happening (in football). We're seeing owners coming in, demanding players are played, that this should happen or that should happen, without knowledge of the game, subsequently leading to a real downturn in the company's fortunes.
"Only one thing can happen and that is the financial chaos that we find at places like Leeds, Birmingham and other clubs.
"Too often owners come in that might have an engineering company, and they'll bring their CEO from the engineering company into the football club.
"I've sat down at board meetings and spoke to directors that have said things that you've had to shake your head at and say 'that has got absolutely nothing to do with how a football club should be run'.
"One of the clubs I went to, they were determined they were going to sack all of the players, they were going to get rid of them all. But they can't do it. They need more knowledge of how a football club is run.
"We've got a situation where too many clubs aren't being run properly and the lack of knowledge between the board and the football side you would not believe."
Blackwell also believes there are too many owners that do not have the best interests of the football club at heart.
He added: "From what I've heard in the game, you'd be surprised by how many owners realise they've got a massive asset and will strip it clean and get as much out of it as I can.
"I've known an owner that couldn't pay the wages of the football club yet he knows it's a massive asset and he wants x amount of money a year, he wants his tickets for the next 10 years... it's awful.
"If some of the things that go on behind the scenes were known, fans would be shocked.
"Take my last job at Bury. You go in there and give them a plan, you give them a structure, you tell them the problems they've got; they agree it, only to find out four weeks later they've got no finances to even do the job.
"How it can be right that one of your directors gets on a board and goes on a tour when nobody is getting paid over Christmas? I've had a chairman like that.
"Managers are judged on their ability to get results but if you don't give them the tools to get results then you've got to start looking elsewhere (to blame)."
To hear more from Blackwell, plus the thoughts of football administrator Brendan Guilfoyle on the situation at Leeds, listen to the full FL72 Weekly show via the Soundcloud player below.