This "ideal" (Glaston will call it a policy which I feel is missleading) is not unique to Daniel Levy. No chairman with ambition toward success willfully sells their players to a direct rival, they do so only as a last resort, or simply because the player wishes it so.
Believe it or not footballers do have a say in their next transfer destination. Although, ultimately, the chairman gets the final say. He can choose to ignore the players wishes and sell to whomever he sees fit, but he does so at his peril. This proposed policy of "my players will be sold abroad or rot in the reserves" is as dangerous as it is unrealistic. Imagine how his current squad of players will feel about such an ignorant, idealistic, inhumane transfer policy? I think it's safe to assume their unhappiness will be heard in the form of mass transfer requests. They simply won't stand for it. Player power and all that.
With such a policy in place, you also have to consider the clubs position in terms of future transfer targets. Why join Spurs when their chairmen drastically limits where they can play football next should they choose to leave? If we're being honest, Spurs are simply a stepping stone to a bigger, more fanciful English club for a great many players, where they can earn far more money with greater chance of winning trophies.
As of this moment, Levy is holding all the bargaining chips and anything less than a bid bordering on lunacy will be met with utter disdain. Fair enough. But should Spurs fail to progress beyond just another top4 finish next season, the tables will begin to turn. Should they fail to win a trophy, again, the tables will turn further still. By this time next summer, if Levy still insists on paying his players a salary unbefitting their ability, the tables will have turned full circle. Realistic bids will come in, heads will turn and Levy's resolve will be tested beyond compare. This is a huge season for Spurs.