After some research, I can tell you that this theory is a half-truth.
When the manufacture and sale of alcohol were illegal between 1920 and 1933, regulatory agencies actually encouraged measures that made industrial alcohol deadly for consumption, including adding lethal chemicals to the mix. But the government never really planned for people to actually drink this alcohol. It was the fault of people who would rather poison themselves than dropping alcohol altogether, even with several people dying around them.
And if you think that's too stupid to be true, replace drinking alcohol with wearing a mask and see how dumb it actually is.