Yes, but Italian/Spanish/French leagues weren't full of foreign players either? so most leagues competed based on the pool of "local" developed resources. England in that model would actually do well simply via the size of the pool of professional players.
Today, European clubs pick the best players from South/Central America, Africa, Eastern Europe, etc to build the bigger sides, to compete against that with only local/home grown players (and the best of those would probably be outside as well) due to wage/cap restrictions would be highly uncompetitive.
As with a lot of ideas, I try to be a realist, i.e. what actually has a chance of being implemented, vs. some ideal of what it used to be like, or what's really a fair and level field. For me 130M income, competing against 350M isn't the problem, it's 130M competing against unlimited (1.3B and counting), thats a problem. Players that cost 16M vs players that cost 35M isn't the problem, it's 16M vs. 50/80M that's the issue.
Gate/tv rights = income, player spend & wages as a % of that income, and yes CL will cause an issue.