Historically, I believe the way to what was a BCPL plus ATPL Theory was either 700 hours of flying time, or 200 hours on an "approved course". The approved courses were generally of the integrated variety and funded largely by airlines, which only funded trainees when they anticipated that they would need pilots. When there was a downturn and airlines went out of business or pilots on the approved courses were not hired by the airline that had sponsored them due to the economic situation, there were some surpluses but there wasn't the permanent surplus situation of today. Banks, to the best of my knowledge, were much more cautious about lending, so gambling a house on flight training wasn't the option it is today.
Personally, I think if pilots were only allowed to sit the ATPL exams after passing an aptitude test (with only a limited numbers of attempts allowed, or at least a few years between attempts), that would thin out the numbers considerably. However, it would have to be a Europe-wide thing, otherwise airlines would use regulatory/labour arbitrage to get around it.
I'm surprised BALPA didn't kick up a large fuss when the 700 hour rule was removed and anyone could enter the market after 200 hours, surely it was obvious that there would be a massive supply of low-houred pilots who would undermine the T&Cs right across the profession? It is, after all, basic supply and demand.