What you're describing is a market, not capitalism. Markets aren't exclusive to capitalism.

Kind of. Capitalism is just short-hand for what people do in an economy (without anyone intervening in their activities).

Capitalism is distinct in that the means of production are privately owned, as dublinben said.

And as I said to him, there's no point in bringing up "the means of production" in this context, because even an iPad is one, and that could be in anyone's hands. Besides, even in Uncle Karl's times, a factory could be owned by well-meaning investors, not only filthy slave-driver oppressor pigs.

As such, "crony capitalism" is capitalism even if some see it as distinct from laissez-faire capitalism.

"Some" see it as distinct? Well, the distinction is political power. Take out a tiny minority's ability to (forcefully) benefit at everyone else's expense, and what you're left with is Capitalism, i.e. what people do in an economy (without intervention), as I said in the beginning, and there is no problem whatsoever with that.

In fact, the relative freedom enjoyed by the early United States is exactly what brought them all their prosperity. Freedom brings prosperity whenever and where ever it happens. Dig up historical examples (other than America) if you insist, but you don't really need to. Anyone with half a brain can see that people will produce goods and services if you just get out of the way and let them (without intervening with taxes, regulations, tariffs, licences, junk fees, state-maintained monopolies & cartels etc).

Really though, crony capitalism is all that has ever existed to my knowledge.

You've got that right. But it's because we've always had rulers. Therein lies the problem. Get rid of rulers (i.e. political power), and there will be unimaginable prosperity.