You are correct that the term "macro" means large scale (e.g. macroeconomics), however its use in photography is relative to microphotography, that is imaging using microscopes.
The tradition definition of a macro lens is one that can achieve a 1:1 magnification, which means the image projected onto the recording medium is life size. So for a common APS-C camera you can fill the frame with an object about 22mm wide, but you won't be able to get any closer to the object.
A 22mm wide object is absolutely huge compared to what you would be typically looking at with a microscope, which could be hundredths of a millimetre. Hence such an image is a macrophotograph when compared to a microphotograph.
Regular photography of course regularly deals with subjects orders of magnitude larger, but there's no need to distinguish a regular "non-macro" photograph. So the name "macro" stuck and began to lose its meaning, especially when it comes to "super-macro" lenses which achieve greater than 1:1 magnification.