Learn English – Are “could I have been able to cope with” and “could I have coped with” the same

The construction might be easier to understand as a statement rather than as a question. We would have thought otherwise, if the economy had been in better shape is a sentence on the pattern sometimes taught to foreign learners as the third conditional. It describes something that didn’t happen, and is formed by would (or some other modal verb) + have + past participle in the main clause, and if + past perfect in the ‘if’ clause.

When a sentence containing a modal verb (would in this case) becomes a question beginning with one of the wh- words (why in this case), the subject and the modal verb are inverted. That is how we end up with Why would we have thought otherwise?

This use of would expresses in the past what will expresses in the present. It is typically used to report the past words or thoughts of someone in a story. In your example, the narrator would have said or thought at the time ‘there will be room for only a very few others’. Because the event as related is in the past, will be becomes would be. In contexts like this, would acts as the past tense of will.