Rooney has put in a number of subpar displays this term and he has only scored two goals in the Premier League.
There have been calls for the Man United captain to be dropped but van Gaal has continued to include Rooney in his starting XI.
James, who played with the 30-year-old for England, insisted van Gaal is to blame for Rooney’s poor run.
“When you look at (Sir Alex) Ferguson at Manchester United, as much as the hairdryer keeps getting mentioned, the team leads the changing room more so than a manager,” James said.
“Wayne was allowed to be himself because however much he argued or (behaved) in his effervescent way around the changing rooms, his performances would justify his character.
“David Moyes comes back in, a bit more of an authoritarian, if you like; (Louis) van Gaal seems to be the same, therefore you’re suppressing this enthusiasm.
“Wayne, at 30 years old, there’s no reason why that old Wayne Rooney spark can’t come back. It’s not about him being reckless – it’s about allowing him to have a bit more personality in his performance. Allow him to take the odd liberty. He can play his way back into form.”
Van Gaal continues to pick Rooney and he has praised his contribution to the dressing room on a number of occasions. It is hard to see how van Gaal is to blame for Rooney’s form as the Dutchman has in fact seemed to have placed his complete faith in the player.