Well then it wouldn't be capitalism all the way down? It would only be capitalism on the outside, socialism on the inside.
Capitalism is a system in which individuals are rewarded according to what the market will give them. If you don't do that you simply don't have capitalism.
From the point of view of the 95% who have no Capital, the 95% who only have their ability to exchange labor for currency, life is fundamentally the same. >40 hours a week traded to somebody else for the currency I need to pay for food, shelter, and entertainment. The value I create in that 40 hours is always greater than I was paid, and the difference is always accumulated by a better connected and more socially powerful minority. Markets and State Planning are superfluous details in this equation.
The best definition (in my ever humble opinion) is that capitalism is a society where the means of production live in a free market, which is completely consistent with what the GP said.
This is not capitalism, though. What people are experiencing and objecting to is corporatism [1].
I believe that if people would give real capitalism a chance, the result would be positive. But as it stands now, the economics are too intertwined with the politics. In order to successfully implement real capitalism, the power that the state wields to erect regulations that can be subverted would have to be stripped: we'd have to neuter the government. Clearly the government would never allow that to happen.
[1] https://secure.wikimedia.org/wikipedia/en/wiki/Corporatism
Just as attempts at establishing communism end up with coercion and purges of dissent, theoretical capitalism ends up with powerful interest groups in practice.