In some European and also Antipodean (I think) countries, they have a tiered licensing system. You have to start on a 125, then progress to a 250 or something like that. This is what fuels the sales of smaller bikes there.
Another factor is that in Europe, there is often a lot more traffic and congestion, so smaller bikes are more practical.
Another factor is the “bigger is better” attitude here in the U.S.A.
A great many Americans are pre-occupied with “image” and are suckers for doing what the media tells them they should do and buy what the media tells them they should buy; that’s why there are so many huge motorcycles (bigger bikes = more profits for the manufacturers).