

why did they decide
Nobody sat down and made a decision to handle country names the way we do. It organically happened the way it did for no particular reason other than it works well enough.
why don’t we change everything back to how the countries’ place names are pronounced by their citizens out of respect
Nobody cares enough to undertake this. I don’t particularly care that people call the US by different names in their languages. People in Turkey aren’t asking us to pronounce their country’s name the same way they do. Most people are happy to apply the inverse golden rule on this, i.e., I don’t pronounce your country’s name the way you do, so I’m not going to expect you to pronounce my country’s name the way I do.
Would it make things harder or would it allow us to grow?
Yes, but I think it would be a lot of work for not much growth. You don’t learn a lot about a place by just pronouncing its name differently.
Those were decisions to change the specific names of specific places, not a decision to handle country names in the general way OP was describing.