Well, the desired separation is certainly impossible, but for different reasons. Political institutions dictate what form a society will take, so there really isn't any separation between "government" on one hand and "the economy" on the other. In laissez-faise, there is a set of laws that outline what is and is not permissible, and these laws are imposed on others who very well may want different ones.
As to "crony capitalism", I do not like to use it. Some call patents an instance of "crony capitalism" and justify this label by stating that patents only exist through "state intervention" when the same is true of normal property. I can also imagine some opponents of laissez-faire referring to privatization and deregulation as cronyism, as well.