Fourth best first team ( probably) and fourth best youth teams ( on average). I agree United still promote the best but its going to get harder and harder for that standard to be 'the best' if the current position is maintained. As a club we should strive to be the best, not easy I know, nobody has a right to the crown, but throughout age groups we have slipped down and it shows no sign of being reversed.
I know what you're saying.
But what's the point of having the best youth team in the country...winning leagues and cups if your'e not going to let those players get into the first team? I mean...what's the point of having a successful youth policy if it's not to get them into the first eleven?
Ideally you get both...but that's not happening with any team. Chelsea and City might win titles but players don't always come through. Same with Liverpool. We have only won one U/18 title in recent seasons and been very poor in the Youth Cup but better at giving players a pathway.
In the last four seasons, our record across all age groups v Liverpool is W10 D1 L5 so they are not ahead of us in terms of head to head results. Neither are Chelsea with a record of W3 D1 L2. So its only City who are consistently beating us head to head...and that record is W2 D6 L6. So in terms of your original post I think recent results give the impression we are behind in some way yet the facts prove otherwise.
Chelsea have won five FA Youth Cups, EUFA Youth Leagues, Reserve team titles (which is fantastic and I wish United would win all these things)...yet they have only featured 13 youth players in the first team in the last three full seasons with only Abraham, Mount, Christensen and James playing 50+ games.
City have featured only 11 players in that period...with only Foden reaching 50+ games.
Liverpool have featured 25 players in the first team (which is a lot better) but only Alexander-Arnold has reached 50+ games
Whilst United have featured 24 players in those three years with Pogba, Rashford, Greenwood, Lingard, Williams, Pereira and McTominay all playing 50+ games and four of those playing over 100 games.
Like I said...it's better to be able to do both. But there's no evidence that suggests that not winning titles and failing to consistently beat your rivals has any impact on the development of young players or how successful your youth policy is.
Finally, given all of this, I don't think it has any negative impact on the players mentality at all.